Trustnet Magazine Issue 10 September 2015 | Page 10
MONEY
ASIAN DEBT CRISIS
8
A FUTILE ATTEMPT
“In the 1990s, emerging Asian
markets such as Thailand, Korea
and Indonesia had too much debt,
both at government and company
level, and far too much of it was in
US dollars as they could borrow
at lower rates than in their own
currencies,” he explained.
“A fixed exchange rate meant
they used up their foreign currency
reserves in a futile attempt to
defend the peg rather than using
the reserves to service their debt
requirements.”
“Cheap US debt had also led to
an investment boom that resulted
in excessive capacity that weighed
on economic growth. This resulted
in soaring bad debts that would
require banks to write off and
recapitalise before countries could
return to growth.”
Julian Mayo, co-chief investment
officer at Charlemagne Capital (UK)
Limited, says the countries that
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ONCE THE DUST SETTLES
“Economies in the West have been
in a slower growth rate over the past
few years despite quantitative easing
– it is difficult to assume growth will
do as well.”
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PERFORMANCE OF SECTOR DURING ASIAN DEBT CRISIS
10%
0%
-10%
IA Asia Pacific Excluding Japan (-59.71%)
-20%
-30%
-40%
-50%
-60%
Sep
manager at Legg Mason affiliate
Brandywine Global.
Black Monday was caused by
slowing growth in China and its
government’s decision to allow
the yuan to devalue against the
dollar – this in turn caused the
overvalued Shanghai index to lose
8.5 per cent in one sitting and sent
stock markets tumbling across the
globe. Jake Robbins, manager of
the Premier Global Alpha Growth
fund, says the causes of the Asian
crisis of the late 1990s were entirely
different.
Jul
T
he dictionary definition of
déjà vu is “the illusion of
having previously experienced
something actually being
encountered for the first time”.
So following the latest event to
be dubbed “Black Monday” when
some investors pointed to the
Asian debt crisis of the late 1990s
and claimed to have felt a sense of
déjà vu, they may well have been
unintentionally correct, as aside
from geography, the two events
have very little in common.
“What is happening ri