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

Captured IS Militants Explain Why They Fought

Fighters from Turkey, Syria tell VOA Kurdish Service what drew them to extremism, jihad More

Security Experts Split on Kenyan Barrier Wall

Experts divided on whether initiative aiming to keep out al-Shabab militants is long-awaited solution or misguided effort More

Video Philippines Wants Tourists Spending Money at New Casinos

Officials say they hope to turn Manila into the next Macau, which has long been Asia’s gambling hub 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.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More