It is already clear that the crisis in Asian markets is not just a temporary fall. Experts talk about the third wave of the global recession, and the world press scares the terrible possibility of a recurrence of the Asian collapse of 1997 that affected Russia’s default a year later. Whether to wait for the next catastrophe? Depends on China, the cost of failure which is very high.
Almost all Asian financial markets now the situation is quite depressing. The index of Shanghai stock exchange SSE Composite index showed the worst quarterly performance since 2008, the Japanese Nikkei index reached the lowest level since 2010, and the Australian XJO – with 2011. Singaporean and Indonesian indices also did not fall so low since the end of the crisis of 2008-2012. “Black Monday” on August 24, when across the Asia-Pacific region simultaneously showered with stock, currency and commodity markets, became the most difficult day of the decade for the economies of the Far East and Southeast Asia and caused a panic among investors.
“Most likely, the crisis will be localised and will not be released outside the Asia-Pacific region. But if it will affect China, the problem will gain global scale”
However, last week, after the announcement by the fed that interest rate increase will not be, Asian stock indexes played back. The economies of South-East Asia is largely tied to foreign investments and foreign investors are in no hurry to increase its share in the markets in anticipation of a rate hike. As a result Asian markets was short of about 40 billion US dollars. From July 2013 the outflow of capital from newly industrialized and developing countries amounted to 940 billion dollars.
Negative short and long – term trends in the market Asian currencies also still present. And trends that enhance their courses this week is not a one-off event in connection with the fed’s decision, no: almost all currencies in the region (except possibly the yuan) are subject to strong volatility. They lost against the dollar, for many of them it is the worst performance since the Asian collapse of 1997. Particularly hard Malaysian ringgit: he had lost 14% of its value in the second quarter and 26% YTD. The South Korean won and Taiwan dollar are also at risk, and the Vietnamese government in August decided to devalue the Dong. Slightly better in the case of the Indonesian rupee (minus 15% since the beginning of the year and the lowest level since August 1998), the Thai baht and the Singapore dollar (minus 8%, the least since 1997).
Moreover, in Singapore the rate of growth fell to 1.3%, this happened on the background of the crisis on the labour market and the decline in economic indicators of the PRC – the main partner of the islanders, which is due to the fact that China is trying to reorient the domestic market with the construction of infrastructure on people’s consumption. Goes to the fact that in the third quarter, the report for which will be published in China on 19 October, Beijing desired an official figure of 7% growth will not be achieved.
Yes, the August devaluation of the yuan still does not affect Chinese exports, but the subsequent collapse of other national currencies is very hurt the most countries in the region. The prices for oil and nonferrous metals remain consistently low – Bloomberg commodity index also reached its lowest level for 16 years. In the medium term it also badly affects the courses of Malaysian and Indonesian currencies, as both countries depend heavily on hydrocarbon exports. In addition to oil prices on the economies of developing and newly industrialized countries in Asia affected by sustained low copper prices as a specific indicator of consumer activity – this metal is used in almost all household appliances.