Friday dawned in Asia with news of massive ructions in US markets, setting off another major slide in currencies and equities in the region. The Federal Reserve’s signal that the US may rein in monetary stimulus should have been seen as a good sign, as it indicates the US confidence in its domestic economy. Unfortunately, the market took the opposite view, not helped by ongoing concerns (see next story) that China is struggling to manage an unruly financial services system that is overheating from shadow banking operations while legitimate players are suffering a credit squeeze. Australia’s market took a hefty blow in early trade before recovering in later morning activity. But the Sydney Morning Herald reports analysts saying that the global market upheaval has “an air of crisis about it”.
The essence of the market volatility of the past week is well summed up in comments from Sharon Zoellner, senior economist at ANZ in New Zealand. She told Bloomberg that exiting the quantitative easing programme will not be easy as the stimulus has resulted in global equities dramatically outperforming the fundamentals. “The hangover is kicking in at the mere mention that the punchbowl will need to be watered down.”
Concerns are growing about a major liquidity crisis in China, with worries that the country’s major banks are on the edge of a systemic default. The rumour mill went into warp speed on Thursday as the overnight lending rate hit record territory, and the Bank of China, the country’s leading commercial bank, was forced to deny reports that it had defaulted. Whatever the truth of the matter, Bank of Communications believes that the central bank, the People’s Bank of China, ploughed more than USD8 billion into the financial system Thursday to relieve the cash shortage.
The Lion City’s worst haze problem in years, if not living memory, is already having a painful impact on the country’s economy – and the outlook is bleak. The haze from fires burning in Indonesia may continue for weeks, officials, say, costing billions in lost tourism and retail revenues. Singapore is in the midst of its annual and popular sales season, which attracts consumers from all over the world. But haze levels in the “hazardous” territory, hitting 400 on the Pollution Standards Index on Friday morning, are keeping people indoors and tourists away. Indonesia, meanwhile, has responded to Singapore’s urging to tackle the annual burning with unhelpful comments that the city state is “behaving like a child” and maintains that the dense smoke is an “act of nature”.
Singapore now claims 101,100 millionaires – up 10% from 2011, while Hong Kong is home to 114,000 millionaires. Japan is also doing well, with household financial assets at their highest in five years. The surge in wealth among Asian populations has been attributed to stock market rallies and currency fluctuations.
Citi’s Asia-Pacific syndicate co-head quit Thursday. Terence Chia is believed to be joining Credit Suisse.
Hong Kong and Singapore may be suffering from unpleasant atmospheric pollution, but these and other Asian cities also boast some of the best longevity statistics in the world. Hong Kong has an average life expectancy of 82.2 yearr, while Singaporeans can expect to live just over an average of 84 years. Japan also fares well, with an average lifespan of nearly 84 years, and Macau comes in at 85.5 years.
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