Risks of a capital crunch in Asia cannot be ruled out despite limited regional exposure to the US subprime mortgage crisis, the Asian Development Bank (ADB) warned yesterday.
Strong economic growth and improved financial systems along with limited exposure have helped curb spillover effects of global credit woes on emerging East Asian economies, the ADB said in its Asia Bond Monitor report.
But even though there are no signs of widespread problems, downside risks to regional economic and financial market trends remain and wider ramifications cannot be ruled out in the future, the report said.
"Prolonged global financial market volatility, a rise in risk aversion along with re-pricing of credit risk could lead to a reversal of capital flows into the region," said Lee Jong-wha, head of the bank's regional economic integration office.
The current global credit market turbulence is the first test of innovative financial instruments that have been used to distribute risks in globally interconnected markets and where reverberations can spread at an alarming speed, the report said.
While the impact on emerging East Asian economies and markets has so far been limited, a sharper slowdown in global growth and tighter credit policies could damp both household and corporate spending, reduce new issuances and delay those already in the pipeline, Lee said.
The bank said continued policy reforms and liberalization of bond markets in emerging East Asia has led to several sovereign credit rating upgrades, a move that augurs well for more rapid expansion of the region's bond markets, which are growing faster than gross domestic product in most markets.
The report said the value of local currency bond markets in East Asia rose 9.9 percent from a year earlier in the first half of this year from US$2.7 trillion outstanding at the end of last year.
Despite turbulence in global credit markets, the bank's Pan Asian bond index gained 5.4 percent from a year earlier in the nine months to September, compared with full-year returns of 13.64 percent last year.
Foreign exchange gains lifted the dollar value of bonds in most economies.
Government local currency bond markets grew 10 percent in the first half of the year.
RETHINK? The defense ministry and Navy Command Headquarters could take over the indigenous submarine project and change its production timeline, a source said Admiral Huang Shu-kuang’s (黃曙光) resignation as head of the Indigenous Submarine Program and as a member of the National Security Council could affect the production of submarines, a source said yesterday. Huang in a statement last night said he had decided to resign due to national security concerns while expressing the hope that it would put a stop to political wrangling that only undermines the advancement of the nation’s defense capabilities. Taiwan People’s Party Legislator Vivian Huang (黃珊珊) yesterday said that the admiral, her older brother, felt it was time for him to step down and that he had completed what he
Taiwan has experienced its most significant improvement in the QS World University Rankings by Subject, data provided on Sunday by international higher education analyst Quacquarelli Symonds (QS) showed. Compared with last year’s edition of the rankings, which measure academic excellence and influence, Taiwanese universities made great improvements in the H Index metric, which evaluates research productivity and its impact, with a notable 30 percent increase overall, QS said. Taiwanese universities also made notable progress in the Citations per Paper metric, which measures the impact of research, achieving a 13 percent increase. Taiwanese universities gained 10 percent in Academic Reputation, but declined 18 percent
UNDER DISCUSSION: The combatant command would integrate fast attack boat and anti-ship missile groups to defend waters closest to the coastline, a source said The military could establish a new combatant command as early as 2026, which would be tasked with defending Taiwan’s territorial waters 24 nautical miles (44.4km) from the nation’s coastline, a source familiar with the matter said yesterday. The new command, which would fall under the Naval Command Headquarters, would be led by a vice admiral and integrate existing fast attack boat and anti-ship missile groups, along with the Naval Maritime Surveillance and Reconnaissance Command, said the source, who asked to remain anonymous. It could be launched by 2026, but details are being discussed and no final timetable has been announced, the source
CHINA REACTS: The patrol and reconnaissance plane ‘transited the Taiwan Strait in international airspace,’ the 7th Fleet said, while Taipei said it saw nothing unusual The US 7th Fleet yesterday said that a US Navy P-8A Poseidon flew through the Taiwan Strait, a day after US and Chinese defense heads held their first talks since November 2022 in an effort to reduce regional tensions. The patrol and reconnaissance plane “transited the Taiwan Strait in international airspace,” the 7th Fleet said in a news release. “By operating within the Taiwan Strait in accordance with international law, the United States upholds the navigational rights and freedoms of all nations.” In a separate statement, the Ministry of National Defense said that it monitored nearby waters and airspace as the aircraft