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Asia's Risk List --------------------------------------------------------------------------------------------------
A US debt crisis & other dangers
● The following is a summary of our new Non-Japan Asia
Economics report. It looks at the key risks facing the region and
how the different countries might fare if things were to go wrong.
● Investors are obviously most focused on a failure of the US debt
talks right now, which could lead to a sovereign default. While
Asian private sector holdings of US government debt are
reasonably small and US banks do not account for significant
domestic lending, Asia would do extremely well to avoid a full
blown credit crunch under a default scenario.
● A bigger risk, in our view, is a protracted period of weak growth in
the US/Euro zone as they attempt to get their fiscal houses in
order. This would hit the likes of Taiwan, Malaysia and Singapore
the hardest. Meanwhile, Taiwan would also be among the worst
affected by a hard-landing in China.
● India, Indonesia and the Philippines are the economies likely to
suffer the least from external shocks, although this may not be
reflected in the relative performance of their markets if the
experience of the 2007-08 global financial crisis is any guide.
Risks aplenty. The global economic outlook is always full of
uncertainties, but the number and potential severity of the risks facing
Non-Japan Asia (NJA) have risen significantly over the recent months
and generally not in a favourable direction.
Four key concerns
The most pressing issue right now is the US debt talks, a breakdown
in which would, at the extreme, mean the world’s risk free asset loses
its risk free status. Fortunately, this remains a distant possibility but
sovereign debt defaults in major western countries can no longer be
ruled out. The same is also true of a US and/or Euro zone double-dip,
a bursting of a possible bubble in China’s property market and a
renewed rise in key commodity prices such as rice and oil.
The impact on Asia
We look at the likely relative impact of each of these shocks on the
various Non-Japan Asian economies as well as the possible market
implications. A summary of the results are shown in Figure 1 with the
countries ranked from 1 to 10, according to our assessment of the
severity of the hit to economic growth – with one being the worst
affected and ten being the least.
From Taiwan to India
Taiwan looks to be highly vulnerable on each count, probably
suffering the largest hit of all from a US/Euro zone demand shock and
among the biggest effects from the other three scenarios. India,
meanwhile, is at the other end of the spectrum, reflecting its relative
lack of integration into the global economy and financial system.
Risks not necessarily reality
We would emphasise that the report is a story about the risks facing
Non-Japan Asia rather than a change to our central views, which, in
any case, remain more cautious than most.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Asia's Risk List --------------------------------------------------------------------------------------------------
A US debt crisis & other dangers
● The following is a summary of our new Non-Japan Asia
Economics report. It looks at the key risks facing the region and
how the different countries might fare if things were to go wrong.
● Investors are obviously most focused on a failure of the US debt
talks right now, which could lead to a sovereign default. While
Asian private sector holdings of US government debt are
reasonably small and US banks do not account for significant
domestic lending, Asia would do extremely well to avoid a full
blown credit crunch under a default scenario.
● A bigger risk, in our view, is a protracted period of weak growth in
the US/Euro zone as they attempt to get their fiscal houses in
order. This would hit the likes of Taiwan, Malaysia and Singapore
the hardest. Meanwhile, Taiwan would also be among the worst
affected by a hard-landing in China.
● India, Indonesia and the Philippines are the economies likely to
suffer the least from external shocks, although this may not be
reflected in the relative performance of their markets if the
experience of the 2007-08 global financial crisis is any guide.
Risks aplenty. The global economic outlook is always full of
uncertainties, but the number and potential severity of the risks facing
Non-Japan Asia (NJA) have risen significantly over the recent months
and generally not in a favourable direction.
Four key concerns
The most pressing issue right now is the US debt talks, a breakdown
in which would, at the extreme, mean the world’s risk free asset loses
its risk free status. Fortunately, this remains a distant possibility but
sovereign debt defaults in major western countries can no longer be
ruled out. The same is also true of a US and/or Euro zone double-dip,
a bursting of a possible bubble in China’s property market and a
renewed rise in key commodity prices such as rice and oil.
The impact on Asia
We look at the likely relative impact of each of these shocks on the
various Non-Japan Asian economies as well as the possible market
implications. A summary of the results are shown in Figure 1 with the
countries ranked from 1 to 10, according to our assessment of the
severity of the hit to economic growth – with one being the worst
affected and ten being the least.
From Taiwan to India
Taiwan looks to be highly vulnerable on each count, probably
suffering the largest hit of all from a US/Euro zone demand shock and
among the biggest effects from the other three scenarios. India,
meanwhile, is at the other end of the spectrum, reflecting its relative
lack of integration into the global economy and financial system.
Risks not necessarily reality
We would emphasise that the report is a story about the risks facing
Non-Japan Asia rather than a change to our central views, which, in
any case, remain more cautious than most.
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