News / Asia

Asia Faces Inflation, Capital Flows After US Federal Reserve Stimulus

As the U.S. Federal Reserve unleashes $600 billion to stimulate the slowing American economy, Asia braces for a ripple effect.

Asia's main stock markets rallied Thursday after the U.S. central bank announced an anticipated move to buy U.S. government bonds. The move, known as quantitative easing, keeps interest rates near zero and encourages banks to lend to consumers and businesses.

Economists say stock prices could continue to rise in Asia as this flood of money finds its way to the region.

The Federal Reserve wants consumption in the United States to pick up to boost the sluggish economy and for prices to rise to fend off deflation.

But that could lead to a big problem elsewhere. Uwe Parpart is the chief Asia economist and strategist in Hong Kong for the U.S. securities dealer Cantor Fitzgerald.

"There are serious concerns that when the U.S. floods the world with dollars that find their way into equities, into stocks in Asia, whether in Hong Kong, in Thailand or Indonesia, the effect of that on the local economies can be quite difficult to cope with," Parpart said.  "The large amount of cheaper dollars coming into the country not only ignites inflation, but you always have to think about whatever comes in quickly can also be pulled out quickly."

Norman Chan, chief executive of Hong Kong's de facto central bank, the Monetary Authority, is looking at the effect on the city's skyrocketing housing market.

"We will take measures that are specific to the housing markets," Chan said. "As far as the HKMA is concerned, we have introduced some measures that tightened [loan] underwriting standards. We will continue to monitor the market conditions and will introduce measures as appropriate."

Hong Kong interest rates mirror that of the U.S. because its currency is pegged to the U.S. dollar. The government here has already increased the supply of land for property development to ease housing prices.

Parpart says authorities in Asia are mindful of recent history when calibrating their responses to the U.S. stimulus. A flow of cheap capital in the mid-1990s created a boom, followed by a deep recession in 1997 when foreign investors suddenly withdrew those investments.

South Korea's finance ministry Thursday warned it may take aggressive measures to curb capital inflows. Thailand and South Korea, badly burned in the economic crisis of 1997, have already imposed limited capital controls.

Australia and India raised interest rates to stay on top of inflation, while the Bank of Indonesia Thursday kept interest rates steady.

A cheap dollar means stronger Asian currencies - which makes Asian exports more expensive. Some central banks, such as the Bank of Japan have been buying dollars to slow their currencies' rise. Some market analysts expect the Bank of Japan, in its meeting Thursday and Friday, to approve its own quantitative easing to boost the Japanese economy

The Taiwan dollar, the Korean won, Malaysian ringgit, and the Chinese yuan rose Thursday, but the dollar strengthened slightly against the Japanese yen.

All these concerns come as the leaders of 20 leading economies prepare to meet in Seoul next week to discuss ways to coordinate economic policies.

You May Like

Sydney Hostage-taker Failed to Manipulate Social Media

Gunman forced captives to use personal Facebook, YouTube accounts to issue his demands; online community helped flag messages, urged others not to share them More

UN Seeks $8.4 Billion to Help War-Hit Syrians

Effort aimed at helping Syrians displaced within their own country and those who've fled to neighboring ones More

Who Are the Pakistani Taliban?

It's an umbrella group of militant organizations whose objective is enforcement of Sharia in Pakistan 'whether through peace or war' More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Will Pakistan School Shooting Galvanize Pakistan Against Extremism?i
X
Ayesha Tanzeem
December 17, 2014 11:54 AM
The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video Will Pakistan School Shooting Galvanize Pakistan Against Extremism?

The attack on a military school in Pakistan’s northwest city of Peshawar left 141 dead, including 132 children. Strong statements of condemnation poured in from across the world. The country announced three days of mourning, and the leadership, both political and military, promised retribution. VOA's Ayesha Tanzeem looks at how likely the Pakistani government is to clamp down on all extremist groups.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.
Video

Video Turkey's Authoritarianism Dismays Western Allies

The Turkish government has been defiant in the face of criticism at home and abroad for its raids targeting opposition media. The European Union on Monday expressed dismay after President Recep Tayyip Erdogan lashed out at Brussels for criticizing his government's action. Turkey's bid to be considered for EU membership has been on hold while critics accuse the NATO ally of increasingly authoritarian rule. Zlatica Hoke reports.
Video

Video US-China Year in Review: Hong Kong to Climate Change

The United States is pushing for a code of conduct to resolve territorial disputes in the South China Sea as it works to improve commercial ties with Beijing. VOA State Department correspondent Scott Stearns reports on a year of U.S. policy toward China from Hong Kong to climate change.
Video

Video Japanese Leader’s Election Win Raises Potential for Conflict with Neighbors

Japan’s Prime Minister Shinzo Abe and his allies easily won a two-thirds majority in parliament Sunday, even though the country has slipped into recession under his conservative policies. VOA’s Brian Padden reports from Seoul, that the prime minister’s victory will empower him to continue economic reforms but also pursue a nationalist agenda that will likely increase tensions with Japan’s neighbors.
Video

Video Nuba Mountain Families Hide in Caves to Escape Aerial Bombings

Despite ongoing peace talks between Sudan's government and the rebel Sudan People’s Liberation Movement-North, or SPLM-N, daily aerial attacks continue in South Kordofan province’s Nuba Mountains. Adam Bailes was there and reports for VOA that government forces are targeting civilian areas, rather than military positions, with their daily bombardments.

All About America

AppleAndroid