Bloomberg reported on the 19th that emerging Asian countries are relatively doing well in rapidly changing economic conditions this year based on their reserves.
No country is free from the recent sharp inflation and the U.S. key rate hike, but Asian countries such as Korea, Indonesia, and the Philippines are benefiting from increasing their foreign reserves to prevent a recurrence of the financial crisis in the late 1990s.
Bloomberg pointed out that the currencies of emerging Asian countries are doing better than the Japanese yen or the euro, which have been evaluated as traditional safe assets in the recent strong dollar, and that these countries’ bond markets are also enduring well.
Bloomberg’s return on investment in local currency bonds in Asian emerging economies was -8.7% this year, but it was better than U.S. government bonds (-11.4%), local currency bonds (-16.7%), and dollar bonds (-19.0%) in global emerging economies.
Bloomberg explained that inflation in emerging Asian countries is relatively low, and each policy authority is accumulating record foreign exchange reserves and using them appropriately.
In addition, foreign exchange reserves in these countries are rapidly decreasing in the process of responding to the recent economic situation, but it is still higher than the end of 2019, just before the spread of COVID-19.
The total amount of foreign exchange reserves in emerging Asian countries exceeded about 2.8 trillion dollars in October last year and still amounts to about 2.6 trillion dollars.
Jerome Hegley, chief economist at reinsurance company Switzerland, said inflation in emerging Asian countries is relatively low, adding, “If we can avoid situations such as stagflation, we can gain competitiveness, and most Asian countries will.”
He said Asia’s defense was lucky, and interpreted that East Asia was less dependent on Russian energy or Ukrainian grains, which had less impact on rising raw material prices due to Russia’s invasion of Ukraine than other regions.
For this reason, the relatively low prices in factories in these countries are also a key factor in seeing the economic outlook well.
Bloomberg noted Southeast Asia’s macroeconomic resilience, especially among Asian emerging economies, pointing out that South Korea and Taiwan’s manufacturing purchasing managers (PMIs) are contracting, while Southeast Asian countries are expanding.
In addition, according to Nomura’s recent evaluation, seven out of 30 major economies around the world are relatively less vulnerable to economic hard landing, of which Indonesia, Malaysia, Taiwan, the Philippines, and India are listed.
However, according to JP Morgan’s evaluation of economic vulnerability by country based on current account, foreign exchange reserves, and interest rates, Thailand and Japan are the most vulnerable among Asian countries, and China, Korea, and India are right above them, Bloomberg added.