The Sub Prime Crisis: The impact on Asia

(Ref: Wall Street Journal, August 20)

If consumption in the US weakens, Asian economies will get affected. While ruling out an Asian financial crisis, Singapore PM Lee Hsien Loong admitted that economic growth could be affected if uncertainty continues and the US economy slows down. South Korea’s Kospi index fell 10.4% last week. Shares in big Japanese companies like Toyota and Canon also fell sharply on August 17th due to concerns that the rising Yen would affect export performance. The rising Yen is due to the unwinding of carry trade positions by investors who are scrambling for liquidity. IPOs are being postponed in Japan. More and more analysts feel that the Bank of Japan will not raise interest rates in the near future. This is a reversal of earlier expectations. Malaysian company MISC and South Korean car maker Kia are postponing their bond issue.