asian central banks
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Working Together for a Better Future. Asian Central Banks. The Asian Financial Crisis. The Setting of The Stage Before the Crisis (Alan Shapiro, 2005). Export Oriented Foreign Currency Denominated Debt Government Directed Capital Allocation Overvalued Currencies. - PowerPoint PPT PresentationTRANSCRIPT
Asian Central Banks
Working Together for a Better Future
THE ASIAN FINANCIAL
CRISIS
The Setting of The Stage Before the Crisis (Alan Shapiro, 2005)
Export Oriented
Foreign Currency Denominated Debt
Government Directed Capital Allocation
Overvalued Currencies
The Experience and Aftermath (Alan Shapiro, 2005)
Chinese yuan against USD (25 %)
Waves of currency selling ( 40-80%)
Huge debt in dollars Capital flight (stock market crashes)
Banking systems disruptedEconomies contracted
Lessons Learnt (Frederic Mishkin, 1999)
Central Bank lender of last resort
International capital flows
Foreign Currency Denominated Debt
International Foreign Reserves
Vietnam
Thailand
Singapore
Philippines
Malaysia
Indonesia
India
China
0 2 4 6 8 10 12
7.1
9.9
6.3
11.2
Real GDP Growth, Annual Percentage Change
2000-081990-99
Source: IMF, World Economic Outlook, October 2008
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
-6
-4
-2
0
2
4
6
8
10
-1.313
5.729
7.025
4.942
Current Account Imbalances (Percentage of GDP)
Major advanced economies (G7) Newly industrialized Asian economiesDeveloping Asia ASEAN-5
-60
-50
-40
-30
-20
-10
0
-48-52 -51
-9
-57
-42
-25-26
-32-37
-50
Big Mac Index (%)
FROM THE ASIAN CRISIS TO THE SUB-
PRIME
The Interval (IMF, 2008)
Relatively Low Exchange Rates
Current Account Surpluses (Oil & Exports)
Large Accumulation of Foreign Reserves
1980 1990 2000 2001 2002 20030
200400600800
10001200
33 129
593 654790
1010
International Foreign Reserves in Emerging Asia
International Foreign Reserves US$ bil
Source: Bank of Canada
China
Japan
Saud
i Arab
iaInd
ia
Taiwan
South
Korea
Singa
pore
Hong K
ong
Malaysi
a
Thaila
nd
2,131,600
1,044,327
Foreign Exchange Reserves by Country (US$ mil)
Source: Sovereign Wealth Fund Institute, IMF, and other Governmental Sources
Roads to the Sub-prime Mortgage Crisis (IMF 2008)
Foreign Reserves
Sufficient Cushion against External Financial and Economic Shocks
Transferring Assets to Sovereign Wealth
Funds ($2-3 trillion)
Largest Sovereign Wealth Funds by AssetsCountry Fund Name Assets $Billion OriginUAE - Abu Dhabi
Abu Dhabi Investment Authority $627 Oil
Saudi Arabia SAMA Foreign Holdings $431 OilChina SAFE Investment Company $347.1 Non-Commodity
China China Investment Corporation $288.8 Non-Commodity
Singapore Government of Singapore Investment Corporation
$247.5 Non-Commodity
Kuwait Kuwait Investment Authority $202.8 OilChina National Social Security Fund $146.5 Non-commodity
China - Hong Kong
Hong Kong Monetary Authority Investment Portfolio
$139.7 Non-Commodity
Singapore Temasek Holdings $122 Non-Commodity
Qatar Qatar Investment Authority $65 OilBrunei Brunei Investment Agency $30 OilMalaysia Khazanah Nasional $25 Non-Commodity
Source: Sovereign Wealth Fund Institute
Financial Markets
Equities
Sovereign Debt
Corporate Debt
Real Estate
Infrastructure
Evolving Central Banks (Frederic Mishkin, 2000)
Monetary Policy Open Market Operations, Overnight
Policy Rates, Reserve Requirements, Discount Rates
Financial Markets Temasek Holdings UBS Abu Dhabi Investment Authority
Citigroup
Contributing Factors to the Crisis (Newsweek 2008)
Besides Mortgage Bankers, Wall Street, Credit Rating Agencies
The Federal Reserve
China, Japan and other Sovereign Wealth Funds
Japan
China
OPEC
Taiwan
Hong K
ong
Korea
Singa
pore
Thail
and
593.4518.7
173.9
42.3 60.6 35.3 31.4 31.8
Foreign Holders of US Treasuries (US$ bil)
Source: Bloomberg, The Star
Challenges in the Next
Society
The Next Society
BRIC Countri
es• Virtual banks - increasing
significant (Mishkin F.S., 2007)
• E-commerce - virtual money (no physical existence) (Peter F. Drucker, 2002)
Virtual Banking
and Virtual Money
-5.0
0.0
5.0
10.0Real GDP Growth (%)
20082009
The Next Society
• Standard and Poor’s estimates that around $750 billion of assets – shariah-compliant management
Islamic Financi
ng
•Guardian (21 July, 2009), global population of 65 and over is set to outnumber children under five
Aging Populat
ion
Opportunities – The Road Ahead
• Worker productivity• Financial centre• High growth (China and
India)
Tele-communicati
on
•Transportation•Public Transport•Trade
Infrastructure
Opportunities – The Road Ahead
Agriculture and
Commodities
0200400600800
1000 937
29 103 51
586
4 13.73.286.15
Economic Stimulus Packages, US$ bil
IMF estimates Jan 2009
Opportunities – The Road Ahead
• Decline in manufacturing (Peter F. Drucker, 2002)
• Knowledge products such as the education - tripled in cost
Education
•Islamic Banking Hub•Petro-dollars
Islamic Banking
Facilitating Development
Supporting commercial banks
Helping companies (involved in these industries) to raise capital
Bonds Equity
Question and
AnswerSession