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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

US Urges Restraint in Hong Kong Protests

Protesters angered by Beijing's decision to only approve candidates that it sanctions for Hong Kong's leadership elections in 2017 More

Archive of Forgotten UCLA Speeches Offers Snapshot of History

Recordings of prominent voices in social change, politics, science and literature from 1960s, early 1970s now available on YouTube 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.
Treasure Hunters Seek 'Hidden Treasure' in Central Kenyai
X
Gabe Joselow
September 29, 2014 6:20 PM
Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Video

Video Reconstruction? What Reconstruction? Life After War in Gaza

It’s been a month since Israel and the Palestinians agreed to a ceasefire to end 52 days of an air and tank war that left 60,000 homes in Gaza damaged or destroyed and 110,000 homeless. Sharon Behn reports that lack of reconstruction is leading to despair.
Video

Video US, Saudi Arabia and UAE Hit Islamic State's Oil Revenue

The United States, Saudi Arabia and the United Arab Emirates have bombed oil facilities operated by Islamic State militants in Syria. It was a truly collaborative effort, with the two Arab countries dropping the majority of the bombs. The 12 refineries targeted were estimated to generate as much as $2 million per day for the terrorist group. VOA Pentagon correspondent Carla Babb has the story.
Video

Video Russia's Food Sanctions Raise Price Worries, Hopes for Domestic Production

Russia retaliated against Western sanctions imposed for its actions in Ukraine by halting food imports from the West. The temporary import ban on food from Australia, the European Union, Norway and North America has Russian consumers concerned that they could face a sharp increase in food prices. But in an ironic twist, the restrictions aimed at the Kremlin have made Russia's domestic food producers hopeful this can boost their business. VOA's Daniel Schearf reports from Moscow.
Video

Video Washington to Pyongyang: 'Shut This Evil System Down'

U.S. Secretary of State John Kerry is calling on North Korea to shut down prison camps and other human rights abuses following a United Nations Commission of Inquiry into "widespread and systematic human rights violations." VOA State Department Correspondent Scott Stearns reports from the United Nations.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid