ASEAN markets await crucial Fed decision

Reading Time: 1 minute

Money exchangeASEAN stocks and currencies were down on September 18 as countries eagerly awaited the decision of the US Federal Reserve to reduce its quantitative easing programme of buying $85 billion US government bonds monthly.

An expected tapering of the programme has already led investors to flee from Southeast Asian markets and put their money to work back in the US or in dollar assets, which has brought the capital markets and currencies in ASEAN under pressure.

With few catalysts to drive buying, the focus now is on the two-day Fed meeting that ends on September 19, and an announcement is expected closely thereafter. The key question is the pace of the reduction. Most observers expect the Fed to reduce monthly buying to $75 or $70 billion – a move that is now already priced in. If it is more, ASEAN nations could feel the heat.

However, most experts do not believe a repeat of the Asian financial crisis in 1997/98. ASEAN countries have come a long way since then when the region was hit by large-scale capital flight that sent many economies into a tailspin.

Foreign currency debt levels are now much lower, and official foreign reserves much higher. Flexible exchange rate regimes have ended overvalued currencies and sudden re-pricing of foreign currency debt. But volatility will continue and it has to be seen which Southeast Asian economies can sail through the headwinds.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid

Reading Time: 1 minute

ASEAN stocks and currencies were down on September 18 as countries eagerly awaited the decision of the US Federal Reserve to reduce its quantitative easing programme of buying $85 billion US government bonds monthly.

Reading Time: 1 minute

Money exchangeASEAN stocks and currencies were down on September 18 as countries eagerly awaited the decision of the US Federal Reserve to reduce its quantitative easing programme of buying $85 billion US government bonds monthly.

An expected tapering of the programme has already led investors to flee from Southeast Asian markets and put their money to work back in the US or in dollar assets, which has brought the capital markets and currencies in ASEAN under pressure.

With few catalysts to drive buying, the focus now is on the two-day Fed meeting that ends on September 19, and an announcement is expected closely thereafter. The key question is the pace of the reduction. Most observers expect the Fed to reduce monthly buying to $75 or $70 billion – a move that is now already priced in. If it is more, ASEAN nations could feel the heat.

However, most experts do not believe a repeat of the Asian financial crisis in 1997/98. ASEAN countries have come a long way since then when the region was hit by large-scale capital flight that sent many economies into a tailspin.

Foreign currency debt levels are now much lower, and official foreign reserves much higher. Flexible exchange rate regimes have ended overvalued currencies and sudden re-pricing of foreign currency debt. But volatility will continue and it has to be seen which Southeast Asian economies can sail through the headwinds.

Do you like this post?
  • Fascinated
  • Happy
  • Sad
  • Angry
  • Bored
  • Afraid