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Fears grow of a bubble in Brazil, China and India
11 Oct, 2010, 04.54PM,AGENCIES
WASHINGTON: Fears are growing that the flood of cash into emerging markets could provide kindling for the next economic crisis and has already fueled simmering currency disputes.
Amid sclerotic growth in the traditional strong markets of Europe, Japan and the United States, emerging giants like Brazil, China and India have become an increasingly attractive proposition to investors.
Billions have been poured into Brazilian bonds, Chinese real estate and Indian equities, which promise better returns than can be found in New York, Tokyo or London.
The Institute of International Finance has projected that around 825 billion dollars will gush into emerging economies this year, up 30 percent from 2009.
While rapidly developing economies might welcome new investors, the sudden rush of cash is poising a host of problems from rising home prices to stronger currencies that make exports less competitive.
"Already a very significant amount of money is following into some emerging economies," Haruhiko Kuroda, the head of the Asian Development Bank, told AFP.
"If this situation intensifies it may become more difficult to manage," he warned.
But is not just the volume of cash that makes Latin American and Asian countries jittery.
"A lot of money flowing into emerging markets is short term, portfolio investment, bank loans and so on, which could quickly be reversed," Kuroda said.
If the economies of Europe, Japan and the United States were to pick up or any number of local crises struck, the bubble could quickly pop.
Facing these risks, ever-more countries have begun to take matters into their own hands.
11 Oct, 2010, 04.54PM,AGENCIES
WASHINGTON: Fears are growing that the flood of cash into emerging markets could provide kindling for the next economic crisis and has already fueled simmering currency disputes.
Amid sclerotic growth in the traditional strong markets of Europe, Japan and the United States, emerging giants like Brazil, China and India have become an increasingly attractive proposition to investors.
Billions have been poured into Brazilian bonds, Chinese real estate and Indian equities, which promise better returns than can be found in New York, Tokyo or London.
The Institute of International Finance has projected that around 825 billion dollars will gush into emerging economies this year, up 30 percent from 2009.
While rapidly developing economies might welcome new investors, the sudden rush of cash is poising a host of problems from rising home prices to stronger currencies that make exports less competitive.
"Already a very significant amount of money is following into some emerging economies," Haruhiko Kuroda, the head of the Asian Development Bank, told AFP.
"If this situation intensifies it may become more difficult to manage," he warned.
But is not just the volume of cash that makes Latin American and Asian countries jittery.
"A lot of money flowing into emerging markets is short term, portfolio investment, bank loans and so on, which could quickly be reversed," Kuroda said.
If the economies of Europe, Japan and the United States were to pick up or any number of local crises struck, the bubble could quickly pop.
Facing these risks, ever-more countries have begun to take matters into their own hands.
