Asia should brace for hot money outflow, says banker Nazir
June 20, 2013
Malaysia and Asia should nevertheless prepare for the day when it must react collectively to sudden outflow of these funds.
KUALA LUMPUR: Malaysia will unlikely feel the pinch if cheap funds, which has been coming its way as a result of the US efforts to jumpstart its economy, are to suddenly reverse as the US economy recovers, according to banker Nazir Razak.
Nazir said mechanisms that had been put in place as a result of the 1997/98 financial crisis has shielded the Malaysian economy from “hot money” inflows.
Nazir, who is CIMB Group Holdings Bhd group CEO, however said Malaysia and Asia should nevertheless prepare for the day when it must react collectively to sudden outflow of these funds.
“Malaysia is probably one of the least to be affected. This is ironic because we now worry about the recovery and the rising interest rates in the US, and consequently what we call the ‘risk-off’ trade, which results in a large sum of money flowing out of Asia,” he told delegates at the CIMB Annual Asia Pacific Conference 2013 in Kuala Lumpur yesterday.
Nazir said regional financial markets may see temporary volatility but that the financial systems in the region are strong and that many governments have learnt the lessons of the 1997/98 financial crisis.
Other developments on the financial event horizon include the after effects of the Malaysian 13th General Election (GE13).
He said Malaysians are keenly watching the developments on how the outcome of the GE13, which was concluded last month, would affect the balance in Parliament when it convenes next week.
“We worry about the ripples of the GE13 transmitting into the various party elections that will happen over the next few months, and we also worry about the legal challenges on the GE13 results going forward,” he said in his presentation.
Meanwhile, Singapore Institute of Internal Affairs chairman Simon Tay said the Asian region is going through a transformation but not so sharply felt as the Arab Spring.
“This transformation has started since the Asian financial crisis up to now and the rationale for this is to continue to look for forms of stability as in the past and ready to face changes.
“Looking forward, I think that an incumbent government can do things for itself and also for the country, and it’s got to make a decision about that in some way,” he said.
He said if the incumbent government is ready to do things for the country, it will have to incorporate new governance and anti-corruption structures as well as reforming itself, which will be the best option in putting the country on the path for the future.
Asian Strategy and Leadership Institute CEO Tan Sri Dr Michael Yeoh Onn Kheng said the emerging Asia is facing the three-D challenges — the development challenge, the demographics challenge and the democratic challenge.
The development challenge basically focuses on the need for inclusive, sustainable development and how to deal with the rising of income inequality, he said.
“The demographic challenge in the region is basically aging society and the democratic challenge, which I think would be the key driver for change, especially in Malaysia,” he said.
There are already signs to show that expectations for democracy and human rights would grow in greater importance as the region continues to develop, he said.
CIMB has upgraded the annual CIMB Conference from Asean to Asia Pacific to reflect its expanded investment banking platform which recently added coverage of the Australian, Indian, South Korean and Taiwanese markets.