Ñòðàíèöà: 9/12
A number of countries in East Asia and elsewhere have begun attracting foreign portfolio investors into their own fixed-income markets ,purchasing, instruments in local currency. In this case the foreign bondholder takes the exchange risk, for which he expects added compensation. It is encouraging that these economies are becoming attractive enough, and their exchange management is considered stable enough, to attract investment in local currency securities. For obvious reasons, interest tends to be in bank deposits, in shorter maturities, and in guaranteed instruments of government or their agencies.
To the extent that short-term capital flows exceed working balances, trade financing, or bridge activities to long-term investment, they are most likely the result of relatively high interest rates not offset by an expected devolution. For the most part, these flows are seeking high short-term rates of return and reflect cash management or speculative decisions rather than long-term investment decisions rather than long-term investment decisions. But like long-term flows, they tend to lower domestic interest rates and appreciate the exchange rate. They are likely to expand bank reserves and lead to more credit expansion, although on a potentially more volatile base. To the extend that a government is trying to restrain domestic demand with high interest rates, the inflow would undermine its policy. These flows may not directly influence long-term savings and investment, but they may do so.
The World Bank and investment bankers regularly provide advice to developing countries on asset and liability management. But that advice often is non optimal or simply wrong. Although many tactical tools for active risk management in developing countries have been developed in the past decade, a framework for developing a strategy that incorporates country-specific factors has lagged far behind.
For example, in case when the Federal Reserve Bank (the “Fed”) last September arranged a $3.6 billion bailout of Long Term Capital Management (LTCM)- a Connecticut- based hedge fund- critics of the US financial establishment cries foul. The bailout contrasted strikingly with IMF treatment of indebted firms in Asia. When indebted businesses in Asia were unable to replay foreign loads, US and IMF officials insisted that they be forced to close and their assets sold off to creditors. Bailing out ailing businesses with endless lines of bank credit was, US officials claimed, the essence of “crony capitalism” and the cause of all Asia’s problems “Reducing expectations of bailouts, ” declared the IMF, must be step number one in restructuring Asia’s financial markets.
To Japanese officials, the LTCM bailout was a clear case of the US “ignoring its own principles”. Representative Bruce Vento (Democrat, Minnesota), in a Congressional investigation of the LTCM bailout, said that “there seem to be two rules, a double standard.” But this view is incorrect. Where bailouts are concerned, there is only one standard. Whether in Korea, Thailand, Connecticut or Brazil, US- and IMF- organized bailouts conform, to the same quiding principle: whatever happens, whoever is at fault, the wealth of Western credits must be protected and enhanced.
Until 1997, Western creditors were bullish on Asia and “emerging markets” generally. They poured billions into stocks, banks and businesses in Thailand, Indonesia, Korea, expecting mega-returns and a piece of the action as the former “Third World” embraced freemarket capitalism. Beginning in 1997, though, Western investors began to worry that they might have over-lent. They pulled out of Thailand first, selling baht for dollars; as the baht’s value collapsed, worry turned to panic. Soon, international financial operators were selling won, ringgit, rupiah and rubles in an effort to cut potential losses and get their funds safety back to Europe and the US. In the ensuing capital flight, Asian stock prices plunged and the value of Asian currencies collapsed. Local businesses that had taken out dollar payments to Western creditors.
Ðåôåðàò îïóáëèêîâàí: 11/02/2008