<p>The turmoil in Asia’s emerging market economies gained pace on Wednesday as the Indian rupee staged its steepest daily decline in years, stocks fell, and economies already smarting from an exodus of much-needed foreign cash faced the added pain of a jump in oil prices.<br /><br /></p>.<p> Asia’s equity and currency markets have been selling off for many weeks as investors have weighed the changing dynamics in the global economy.<br /><br />The spike in oil prices has clouded Asia's growth prospects further. The price of oil jumped from about $107 per barrel at the start of this week to $109 on Tuesday and more than $112 on Wednesday amid signs that the Obama administration is considering military action in Syria. The price retreated later Wednesday to $110. <br />The rising cost is raising the import bills for companies and countries around the region. It also threatens to fan inflation and complicate the job of policy makers as they juggle the need to bolster growth while containing inflation.<br /><br />A gradual pickup in US and European growth, combined with slow progress on reforms in many Asian economies, is causing many investors to look for better opportunities elsewhere, said Andrew Sullivan, the director of sales trading at Kim Eng Securities in Hong Kong. “A lot of cash flowed into emerging markets in the last few years as investors searched for yield,” he said. Now that Western economies are showing signs of turning around, he said, these flows have been reversing. Investors, he said, "are seeking the safety of returning their cash to nearer home. It is difficult to see that changing any-le soon.”<br /><br />Soothing comments<br /><br />The performance of Asian markets has underlined the point. Stock markets in Japan and Hong Kong both fell more than 1.5 per cent, echoing declines on Wall Street on Tuesday. The benchmark index in the Philippines — one of the best performers in the world in 2012 — sagged 3 per cent. In Thailand, the main index dropped 1.4 per cent, taking its decline since late May to more than 20 per cent, while the baht fell to 32.24 per US dollar, its weakest level since March 2010. Those falls came despite soothing comments from the Thai central bank's deputy governor, Pongpen Ruengvirayudn, who said on Tuesday that the bank had “enough reserves at the moment to cover outflows and maintain economic growth including imports”, Reuters reported.<br /><br />Indonesia, the rupiah fell to 10,930 dollar, its weakest level since April Investors there are awaiting a central bank policy meeting, hastily called hursday amid widespread speculation that the bank may move to raise interest rates in a bid to prop up the currency. Policy makers in Indonesia and other emerging markets are in a tough situation, said Sullivan of Kim Eng Series. While higher interest rates it help attract renewed capital inflows, he said, they would also raise funding costs for companies and risk stifling growth. "It's a very difficult situation — there are no easy answers to this," he said.<br /><br />In India, among the most vulnerable Asian economies, the emerging markets turmoil of the past three months has come on top of years of nervousness about slowing growth and political gridlock ahead of elections next year. A persistent current-account deficit also has meant that the outflows from India have been especially pronounced among risk-averse investors in recent months. As a result, the rupee has been falling for more than two years, with especially pronounced declines since the Federal Reserve signalled last May that it would soon scale back its support of the US economy.<br /><br />Another sharp lurch downward on Wednesday at one point caused the rupee to hit 68.75 per dollar before falling back to 67.85 late in the day. The move marked the largest intraday drop in the currency in years and highlighted the intense nervousness that has built up around India in recent months. Adding to the country’s problems is the spike in oil prices. India is a big importer of oil, so the rupee's weakness, combined with the oil price move, is sharply increasing its import bills.<br /><br />Many analysts and policy makers have stressed that the turmoil of the past few months does not herald another crisis of the sort that shook Asia in 1997-98. Central bank foreign exchange reserves are higher than they were then, for example, while more Asian debt is now in local currencies, rather than in dollars, meaning that weaker local currencies do not bring a painful increase in debt servicing costs.<br /><br />"The road may be rocky in the near term, particularly for the largest-deficit countries — India and Indonesia — but we don't think this is the Asian crisis all over again," Paul Gruenwald, Standard & Poor’s chief economist for the Asia-Pacific, said in a report.<br /></p>
<p>The turmoil in Asia’s emerging market economies gained pace on Wednesday as the Indian rupee staged its steepest daily decline in years, stocks fell, and economies already smarting from an exodus of much-needed foreign cash faced the added pain of a jump in oil prices.<br /><br /></p>.<p> Asia’s equity and currency markets have been selling off for many weeks as investors have weighed the changing dynamics in the global economy.<br /><br />The spike in oil prices has clouded Asia's growth prospects further. The price of oil jumped from about $107 per barrel at the start of this week to $109 on Tuesday and more than $112 on Wednesday amid signs that the Obama administration is considering military action in Syria. The price retreated later Wednesday to $110. <br />The rising cost is raising the import bills for companies and countries around the region. It also threatens to fan inflation and complicate the job of policy makers as they juggle the need to bolster growth while containing inflation.<br /><br />A gradual pickup in US and European growth, combined with slow progress on reforms in many Asian economies, is causing many investors to look for better opportunities elsewhere, said Andrew Sullivan, the director of sales trading at Kim Eng Securities in Hong Kong. “A lot of cash flowed into emerging markets in the last few years as investors searched for yield,” he said. Now that Western economies are showing signs of turning around, he said, these flows have been reversing. Investors, he said, "are seeking the safety of returning their cash to nearer home. It is difficult to see that changing any-le soon.”<br /><br />Soothing comments<br /><br />The performance of Asian markets has underlined the point. Stock markets in Japan and Hong Kong both fell more than 1.5 per cent, echoing declines on Wall Street on Tuesday. The benchmark index in the Philippines — one of the best performers in the world in 2012 — sagged 3 per cent. In Thailand, the main index dropped 1.4 per cent, taking its decline since late May to more than 20 per cent, while the baht fell to 32.24 per US dollar, its weakest level since March 2010. Those falls came despite soothing comments from the Thai central bank's deputy governor, Pongpen Ruengvirayudn, who said on Tuesday that the bank had “enough reserves at the moment to cover outflows and maintain economic growth including imports”, Reuters reported.<br /><br />Indonesia, the rupiah fell to 10,930 dollar, its weakest level since April Investors there are awaiting a central bank policy meeting, hastily called hursday amid widespread speculation that the bank may move to raise interest rates in a bid to prop up the currency. Policy makers in Indonesia and other emerging markets are in a tough situation, said Sullivan of Kim Eng Series. While higher interest rates it help attract renewed capital inflows, he said, they would also raise funding costs for companies and risk stifling growth. "It's a very difficult situation — there are no easy answers to this," he said.<br /><br />In India, among the most vulnerable Asian economies, the emerging markets turmoil of the past three months has come on top of years of nervousness about slowing growth and political gridlock ahead of elections next year. A persistent current-account deficit also has meant that the outflows from India have been especially pronounced among risk-averse investors in recent months. As a result, the rupee has been falling for more than two years, with especially pronounced declines since the Federal Reserve signalled last May that it would soon scale back its support of the US economy.<br /><br />Another sharp lurch downward on Wednesday at one point caused the rupee to hit 68.75 per dollar before falling back to 67.85 late in the day. The move marked the largest intraday drop in the currency in years and highlighted the intense nervousness that has built up around India in recent months. Adding to the country’s problems is the spike in oil prices. India is a big importer of oil, so the rupee's weakness, combined with the oil price move, is sharply increasing its import bills.<br /><br />Many analysts and policy makers have stressed that the turmoil of the past few months does not herald another crisis of the sort that shook Asia in 1997-98. Central bank foreign exchange reserves are higher than they were then, for example, while more Asian debt is now in local currencies, rather than in dollars, meaning that weaker local currencies do not bring a painful increase in debt servicing costs.<br /><br />"The road may be rocky in the near term, particularly for the largest-deficit countries — India and Indonesia — but we don't think this is the Asian crisis all over again," Paul Gruenwald, Standard & Poor’s chief economist for the Asia-Pacific, said in a report.<br /></p>
