Nomura sees Asian interest rates up

Nomura sees Asian interest rates up

TOKYO (AFP): Asian interest rates are expected to rise further
to offset inflationary pressures, exerting a more negative effect
on domestic demand in the coming year, according to the Nomura
Research Institute.

The research arm of Nomura Securities Co. Ltd. said in the
latest edition of its Capital Market Trends monthly that Asian
economies were continuing to grow at a robust pace thanks to the
strong yen and firm domestic demand.

"Strong economic growth, however, has led to inflationary
pressures and a deterioration in their current account balances,
prompting monetary authorities to tighten their credit reins,"
the institute said.

Economic growth in South Korea, Taiwan, Hong Kong, Singapore,
Indonesia, Thailand, the Philippines and Malaysia "should
moderate to a more sustainable level in 1995 as interest rates
edge higher and the positive impact of the yen's appreciation
diminishes," it said.

The institute noted that investment and private consumption in
Asia had been strengthening on the back of rising wages and
corporate profits.

"As a result, imports have been growing even faster than
exports, leading to a deterioration in the current account
balances. Indeed, domestic demand has replaced net exports as the
engine of economic growth," it said.

Coupled with higher interest rates overseas, domestic interest
rates have edged upwards from their lower levels with monetary
authorities tightening credit to contain inflationary pressures
arising from tight labor conditions.

"Both domestic and overseas factors suggest that interest
rates should rise further, and their negative effects on
corporate demand will become more apparent in 1995," the
institute said.

"However, strong domestic demand, reflecting rising corporate
earnings and wages and the implementation of major infrastructure
projects, should keep the pace of economic expansion in these
countries close to their potential growth rates."