U.S. rate hike casts shadow on regional markets<\/p>\n
SINGAPORE (AFP): Further U.S. interest-rate increases could
\nspeed up the outflow of foreign capital from Southeast Asia amid
\na loss of confidence in regional economies and fears of a banking
\ncrisis, an investment house warned.<\/p>\n
Thailand is most vulnerable, according to Vickers Ballas
\nInvestment Research, which predicted another 50 basis-point
\nincrease \"within the next one to two quarters\" in the U.S.
\nFederal Reserve fund rate.<\/p>\n
It said a rate hike will produce \"strains\" on markets within
\nthe Association of Southeast Asian Nations (ASEAN), which groups
\nBrunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand
\nand Vietnam.<\/p>\n
\"To a lesser or greater degree, the ASEAN economies are in the
\nmidst of an economic slowdown,\" said the Vickers Ballas Regional
\nStrategy report. \"There appears to be de-rating of the ASEAN
\nmarkets by foreign investors.<\/p>\n
\"There are doubts about the euphoria over the Asian miracle.
\nThis loss of confidence is aggravated by the fear of a banking
\ncrisis due to the exposure to the property sector.\"<\/p>\n
It said short-term foreign capital was \"heading out\" and
\nfurther U.S. interest rate hikes \"could \"accelerate the flow.\"<\/p>\n
\"Thailand is the most critical. Singapore is likely to be the
\nonly exception,\" Vickers Ballas said.<\/p>\n
Tempted by expectations of attractive returns and secure
\nlendings, banks have in many cases increased exposure to the
\nproperty sector to high levels, according to analysts.<\/p>\n
Thailand has been faced with a finance sector crisis amid a
\nproperty glut and falling prices.<\/p>\n
The report warned that Thai interest rates have been kept
\n\"artificially high\" despite its deepest economic downturn in a
\ndecade.<\/p>\n
\"The fear is what will another 50 basis point increase in the
\nFed fund rate do to Thai rates? If it threatens to trigger a
\ncapital outflow, interest rates will have to be pushed up
\nsharply. It will increase the economic problem.\"<\/p>\n
Vickers Ballas, however, adopted a \"neutral position\" on the
\nThai market, saying the longer term was positive. An export-led
\nrecovery will set off a \"positive chain reaction\" and the return
\nof confidence in the economy will allow interest rates to fall,
\nit said.<\/p>\n
It said the drain on regional liquidity will have a negative
\nimpact on the Hong Kong market, tempering \"our otherwise bullish
\nview on earnings prospects, and the benefit of an expanding
\nChinese economy.\"<\/p>\n
The securities house took a neutral stance on Hong Kong.<\/p>\n
It said the Singapore market was on \"a recovery play\" on the
\nback of a manufacturing-led economic rebound in the second half
\nof 1997, and took an \"overweight position\" on the city-state.<\/p>\n
\"The safe haven qualities of the Singapore market are becoming
\nmore prominent against the backdrop of increased volatility in
\nthe region,\" it said.<\/p>\n
Vickers Ballas took an \"underweight\" stance in the Philippine
\nmarket, saying credit restraints will weigh down the bourse in
\nthe near-term and poorer than expected results of some big
\ncompanies could lead to a lowering of consensus earnings
\nforecasts.<\/p>\n
\"Given the fragile sentiment, a further Fed fund rate hike
\nwill be very unhelpful. It will pressure the peso, and cause the
\ncentral bank to raise the overnight rate,\" it said.<\/p>\n
It said Malaysia was \"looking less attractive,\" citing the
\nnegative sentiment generated by recent credit restraints and
\ncontinued high interest rates, and took an underweight stance on
\nit.<\/p>\n
\"Interest rates will stay high... Further hikes in the Fed
\nfund rate will not help. It could be another factor nudging the
\nreversal of funds flow,\" it added.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/us-rate-hike-casts-shadow-on-regional-markets-1447893297",
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