Transcript Asian Central Banks

Working
Together for a
Better Future
Asian Central
Banks
The Setting of The Stage Before
the Crisis
(Alan Shapiro, 2005)
 Export Oriented
 Foreign Currency Denominated Debt
 Government Directed Capital Allocation
 Overvalued Currencies
The Experience and Aftermath
Shapiro, 2005)
 Chinese yuan
against USD (25 %)
 Waves of currency selling ( 40-80%)
 Huge debt in dollars
 Capital flight (stock market crashes)
 Banking systems disrupted
 Economies contracted
(Alan
Lessons Learnt
 Central Bank
(Frederic Mishkin, 1999)
lender of last resort
 International capital flows
 Foreign Currency Denominated Debt
 International Foreign Reserves
Real GDP Growth, Annual Percentage Change
11.2
China
9.9
India
Indonesia
6.3
Malaysia
7.1
2000-08
1990-99
Philippines
Singapore
Thailand
Vietnam
0
2
Source: IMF, World Economic Outlook, October 2008
4
6
8
10
12
Current Account Imbalances (Percentage of
GDP)
8
7.025
5.729
6
4.942
4
2
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
-2
2005
2006
2007
2008
-1.313
-4
-6
Major advanced economies (G7)
Newly industrialized Asian economies
Developing Asia
ASEAN-5
2009
-10
-50
-60
-20
-48
-52
-9
-51
-57
-30
-40
-25
-26
Thailand
Taiwan
South Korea
Singapore
Saudi Arabia
Philippines
Malaysia
Japan
Indonesia
Hong Kong
China
Big Mac Index (%)
0
-32
-37
-42
-50
The Interval
(IMF, 2008)
 Relatively Low Exchange Rates
 Current Account Surpluses (Oil & Exports)
 Large Accumulation of Foreign Reserves
International Foreign Reserves in Emerging Asia
1010
1200
1000
593
800
654
790
International Foreign
Reserves US$ bil
600
400
200
129
33
Source: Bank of Canada
0
1980
1990
2000
2001
2002
2003
Foreign Exchange Reserves by Country (US$ mil)
2,131,600
1,044,327
Source: Sovereign Wealth Fund Institute, IMF, and other Governmental Sources
Roads to the Sub-prime Mortgage
Crisis
(IMF 2008)

Foreign Reserves
 Sufficient Cushion against External Financial
and Economic Shocks

Transferring Assets to
Sovereign Wealth Funds
($2-3 trillion)
Largest Sovereign Wealth Funds by Assets
Country
UAE - Abu
Dhabi
Saudi Arabia
China
Fund Name
Abu Dhabi Investment Authority
Assets $Billion Origin
$627
Oil
SAMA Foreign Holdings
SAFE Investment Company
$431
$347.1
Oil
Non-Commodity
China
China Investment Corporation
$288.8
Non-Commodity
Singapore
$247.5
Non-Commodity
Kuwait
China
Government of Singapore
Investment Corporation
Kuwait Investment Authority
National Social Security Fund
$202.8
$146.5
Oil
Non-commodity
China - Hong
Kong
Singapore
Hong Kong Monetary Authority
Investment Portfolio
Temasek Holdings
$139.7
Non-Commodity
$122
Non-Commodity
Qatar
Brunei
Malaysia
Qatar Investment Authority
Brunei Investment Agency
Khazanah Nasional
$65
$30
$25
Oil
Oil
Non-Commodity
Source: Sovereign Wealth Fund Institute
Financial Markets
 Equities
 Sovereign Debt
 Corporate Debt
 Real Estate
 Infrastructure
Evolving Central Banks
(Frederic Mishkin, 2000)
Monetary Policy
 Open Market Operations, Overnight Policy
Rates, Reserve Requirements, Discount Rates
Financial Markets
 Temasek Holdings
UBS
 Abu Dhabi Investment Authority
Citigroup
Contributing Factors to the
Crisis
(Newsweek 2008)
Besides Mortgage Bankers, Wall Street, Credit
Rating Agencies
The Federal Reserve
China, Japan and other Sovereign Wealth Funds
Foreign Holders of US Treasuries (US$
bil)
593.4
518.7
173.9
42.3
Source: Bloomberg, The Star
60.6
35.3
31.4
31.8
Challenges in
the Next Society
The Next Society
Real GDP Growth (%)
10.0
BRIC
Countries
5.0
0.0
-5.0
2008
2009
Virtual
Banking and
Virtual
Money
World
UK
US
Euro China India Asean Japan
Area
5
• Virtual banks - increasing
significant (Mishkin F.S., 2007)
• E-commerce - virtual money (no
physical existence) (Peter F.
Drucker, 2002)
The Next Society
Islamic
Financing
• Standard and Poor’s estimates
that around $750 billion of assets –
shariah-compliant management
Aging
Population
• Guardian (21 July, 2009), global
population of 65 and over is set
to outnumber children under
five
Opportunities – The Road Ahead
Telecommunication
• Worker productivity
• Financial centre
• High growth (China and India)
Infrastructure
• Transportation
• Public Transport
• Trade
Opportunities – The Road Ahead
Economic Stimulus Packages, US$
bil
Agriculture
and
Commodities
1000
800
600
400
200
0
937
586
29
103 51
4 13.7 3.28 6.15
IMF estimates Jan 2009
Opportunities – The Road Ahead
Education
• Decline in manufacturing (Peter
F. Drucker, 2002)
• Knowledge products such as
the education - tripled in cost
Islamic
Banking
• Islamic Banking Hub
• Petro-dollars
Facilitating Development
 Supporting commercial banks
 Helping companies (involved in these
industries) to raise capital
Bonds
Equity
Question
and
Answer
Session