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

US Border Patrol Union Accused of Taking Sides on Immigration

Report alleges agents leaking info to immigration opponents, appearing at their private events; Center for Immigration Studies director defends agents' actions More

Video Blind Somali Journalist Defies Odds in Mogadishu

Reporting from Somali capital for past decade, Abdifatah Hassan Kalgacal has been working at one of Mogadishu's leading radio stations covering parliament More

Video Rights Monitor: Hate Groups' Use of Internet to Inflame, Recruit Growing

Wiesenthal Center's Abraham Cooper says extremists have become skilled at celebrating violence, ideology on Web 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.
Hate Groups Spread Influence Via Interneti
X
Mike O'Sullivan
June 30, 2015 8:20 PM
Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Syrians Flee IS Advance in Hasaka

The Syrian government said Monday it has taken back one of several districts in Hasaka overrun by Islamic State militants. But continued fighting elsewhere in the northern city has forced thousands of civilians from their homes. In this report narrated by Bill Rodgers, VOA Kurdish Service reporter Zana Omer describes the scene in Amouda, where some of the displaced are taking refuge.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video S. Korea Christians Protest Gay Rights Festival

The U.S. Supreme Court decision mandating marriage equality nationwide has energized gay rights supporters around the world. Gay rights remain a highly contentious issue in a key U.S. ally, South Korea, where police did a deft job Sunday of preventing potential clashes between Christian protesters and gay activists. Kurt Achin reports from Seoul.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.
Video

Video In Syrian Crisis, Social Media Offer Small Comforts

Za’atari, a makeshift city in Jordan, may be the only Syrian refugee camp to tweet its activities, in an effort to keep donors motivated as the war in Syria intensifies and the humanitarian crisis deepens. Inside the camp, families say mobile phone applications help hold together families that are physically torn apart. VOA’s Heather Murdock reports.

VOA Blogs