Asia slowly losing its luster – Nomura

Asia slowly losing its luster – Nomura

By Prinz P. Magtulis (The Philippine Star) | Updated April 15, 2013 – 12:00am

MANILA, Philippines – Strong economies in the Asian region are slowly losing their luster as the low interest environment here and abroad is beginning to cause some problems, an investment bank said.

“We are becoming more concerned that Asia’s once solid economic fundamentals are deteriorating,” Nomura economist Rob Subbaraman said in the bank’s Asia Economic Monthly report.Growth in emerging Asia —  including the Philippines — is seen to slow down this year, he said, in part because of an expected pick-up in the US and European economies as well as that of Japan.

The US, Japan, and European Union have all implemented loose monetary policies characterized by near-zero interest rates and billions in asset purchases in a bid to boost demand and economic growth.

The goal was to encourage more borrowing of credit to finance economic activity and strengthen economic output, in the process. Such policies though, Subbaraman said, have caused huge inflows to Asia where rates are relatively higher.

As a result, some of the region’s economies are experiencing challenges ranging “from frothy property markets to a high or rapid build-up of debt.”

Problems of large trade deficits and high inflation rates were also noted as some Asian nations resorted to lowering their own interest rates in a bid to shun some capital flows.

Too low interest rates allow easy access to credit and thus push up demand for goods and in effect, result into faster inflation. “Overheating” then becomes “apparent,” Subbaraman said, as higher consumer prices slow growth.

The economist suggested that instead of keeping rates at floor, the region should begin to implement “supply-enhancing” structural reforms such as the removal of subsidies and relaxing restrictions on foreign direct investments (FDI).

“The time is approaching for other Asian countries to follow Singapore’s example of relying less on accommodative monetary and fiscal policies and focusing more on structural reforms…,” he pointed out.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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