The decision by the Fed to launch into a new round of quantitative easing was met with support from various central banks around the world. In Asia both China and Japan increased their programs, but at a nominal capacity. There are still some benefits to be gained from lagging the West in printing money.
The uncertainty in the market caused by the European crisis and the upcoming US elections has increased Asia’s growth forecasts. Chinese growth is a significant concern as some economic figures have hinted at a slowdown. Government officials have gone out of their way to reassure the market that all is well and that they are on top of the situation.
Peter Pham build a strong case for China and Japan to delay or keep their QE programs small:
By keeping the yen strong versus the euro and the dollar, Japan can attract capital from overseas and use it to deploy it around Asia. There should be enough money sloshing around the region so that Asian nations can continue their trade with the West at current levels while also focusing more on regional growth.
The economies of Indonesia, Thailand and Malaysia are already growing above expectations this year despite volatility in their currencies because of the fear over Europe. With worries about Europe starting to wane, these countries, as well as the best companies in them, should have little trouble raising capital through bond sales.
He also outlines the two countries where their peg, be it to the actual currency or the foreign rate has also imported some of the downside of cheap access to money which could fuel a housing bubble.
The wildcards for Asia are Hong Kong and Singapore.
The conclusion is that even with the danger of inflation and property bubbles, overall Asia is well positioned to step forward and receive some of the funds exiting other markets.
But all in all, the latest round of QE is mostly bullish for Asia as it creates some certainty after the past 12 months of extreme uncertainty. Even though the actions by central banks in the West appear to indicate that their economies are worse than the headlines make it seem, the mere fact that the Fed and ECB have acted should reassure investors throughout Asia