Monday, January 17, 2022
Home Business Omicron, China slowdown, tapering, economist says

Omicron, China slowdown, tapering, economist says


Passersby wearing protective face masks following an outbreak of the coronavirus disease (COVID-19) are reflected on a screen displaying stock prices outside a brokerage in Tokyo, Japan, March 17, 2020.

Issei Kato | Reuters

Asian countries will face three major headwinds in the year ahead, according to Carlos Casanova senior economist, Asia at Swiss private bank UBP.

“We have rising omicron cases. We have priced in slower growth in China at around 5%. And now, the Fed meeting minutes suggest that the pace of the tapering will be faster-than-expected,” he told CNBC “Squawk Box Asia” on Friday, adding that these factors “pose a threat for the region as a whole.”

The U.S. central bank spooked investors last week after minutes of its December meeting signaled members were ready to tighten monetary policy more aggressively than previously expected.

The Federal Reserve indicated it may be ready to start raising interest rates, dial back on its bond-buying program, and engage in high-level discussions about reducing holdings of Treasurys and mortgage-backed securities.

While Asia’s emerging markets are well positioned, they will be more impacted by these factors — especially if the Fed moves aggressively on the policy front, Casanova pointed out.

“There will be a real rate compression between emerging markets in Asia and the U.S,” he said. This may lead to further outflows of bonds in the region, especially from economies that are more vulnerable, he added.

In 2013, the Fed triggered a so-called “taper tantrum” when it began to wind down its asset purchase program. Investors panicked and it triggered a sell-off in bonds, causing Treasury yields to surge.

As a result, emerging markets in Asia suffered sharp capital outflows and currency depreciation, forcing central banks in the region to hike interest rates to protect their capital accounts.

It all depends on how the Fed goes about normalizing its policy in the coming months, Casanova said.

“What we are fighting to avoid is a situation, whereby, they are more proactive in reducing their balance sheet at the same time as they’re implementing three rate hikes in 2022,” he noted, saying that potentially could translate to further outflows from the region and deflationary pressures.



Source link

RELATED ARTICLES

Mady Gosselin: Hey, Racists, I’m Proud to Be Asian!

As has been made clear over the years, Jon and Kate Gosselin cannot stop arguing overr petty nonsense, even in the wake of...

Britney Spears to Jamie Lynn: You Abandoned Me When I Needed You Most!

One of the saddest aspects of Britney Spears' fight for freedom is the fact that her entire family seems to have sided with...

Jasmine Pineda SCREAMS at Gino Palazzolo for Making Her “Look Crazy” on 90 Day Fiance: Before The 90 Days (Recap)

Somehow, it took half a dozen episodes for 90 Day Fiance: Before The 90 Days to introduce part of its cast. But the introduction...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -

Most Popular

Mady Gosselin: Hey, Racists, I’m Proud to Be Asian!

As has been made clear over the years, Jon and Kate Gosselin cannot stop arguing overr petty nonsense, even in the wake of...

Britney Spears to Jamie Lynn: You Abandoned Me When I Needed You Most!

One of the saddest aspects of Britney Spears' fight for freedom is the fact that her entire family seems to have sided with...

Jasmine Pineda SCREAMS at Gino Palazzolo for Making Her “Look Crazy” on 90 Day Fiance: Before The 90 Days (Recap)

Somehow, it took half a dozen episodes for 90 Day Fiance: Before The 90 Days to introduce part of its cast. But the introduction...

Farrah Abraham Responds to Arrest: I Was Set Up! Bruised! And Battered!

On Saturday night, Farrah Abraham was arrested for battery. This is a fact. But that doesn't mean it tells the whole story. Not according to the Teen...

Recent Comments