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Analysis: Asia poses bigger financial threat
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Analysis: Asia poses bigger financial threat
Stock markets instead of worrying about worldwide economic slowdown should focus on mounting financial risks in Asia, an analysis by a leading business research organisation has said. While the US and other economies are heading for a slowdown, a recession is not in the cards, Gail D. Fosler, Executive Vice President and Chief Economist of The Conference Board, a non-profit organisation which conducts research, convenes conferences and makes forecasts on business trends has said.
Her analysis appears in StraightTalk, a newsletter designed exclusively for members of The Conference Board’s global business network. In the early 1990s, investment in Asia exploded and total investment rose to match the level of savings. But after the Asian financial crisis, investment fell back to 29 per cent of GDP and has risen since then but savings have risen faster, making Asia once again a major lender, it said.
“These imbalances are made worse when there are huge inflows of foreign capital to private markets. Many of these countries have high savings rates because they have less developed financial markets and institutions, Fosler said. “There is a substantial and growing excess of savings that is misallocated globally and giving rise to huge waves of liquidity that may misprice risk in the short term and create credit and/or market crises.”
<I>Source: Times of India</I>
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