Good morning. Here's my take on some of the stories driving the debate in politics, finance and social issues across Asia today:
South Korea bucks the trend toward currency chaos.
The won has quietly become Asia’s best performing currency as investors flee India, Indonesia and other nations that seem to have forgotten their Economics 101. In times of trouble, markets reward those with current-account surpluses, and Korea’s is equal to 4.9 percent of gross domestic product. The won is up 2.3 percent against the dollar this quarter. That puts Korea in an enviable position as the world braces for any Federal Reserve move to withdraw monetary stimulus.
Is the world facing a “global QE crisis?”
Former Morgan Stanley chief economist Stephen Roach certainly thinks so. Roach, now a senior fellow at Yale University, believes the Fed created a monetary monster with its massive quantitative-easing experiment and bears the blame for the market turmoil sure to hit Asia’s emerging nations when it's scaled back. “Were it not for the interest-rate suppression that QE has imposed on developed countries since 2009,” Roach argues, “the search for yield would not have flooded emerging economies with short-term ‘hot’ money.” On the other hand, if countries like India had focused on making tough structural adjustments during the last few years rather than spending that money, not all of it would be so eager to leave.
As investors wonder if it’s 1997 all over again in Asia, events in Bangkok, where the region’s last crisis began, are less than comforting. Thai stocks are down more than 20 percent from this year’s high, putting the benchmark SET Index on track for its longest losing streak since 1998. Capital is fleeing as Thailand enters a recession, exports decline and analysts estimate a $550 million current-account deficit for July. If Bangkok is alarmed about the accelerating capital flight, it’s not saying. Worse, officials are doing little to restore a semblance of calm.
All of Asia loses as China and Japan nix summit.
It’s what those in diplomatic circles would call the ultimate no-brainer: a meeting between Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe at next month’s G-20 meeting in St. Petersburg. It would have been the perfect opportunity for Asia’s two most powerful nations to promote economic cooperation, ease security tensions, and talk about North Korea and a raft of other pressing geopolitical issues. Even better, the chat would have taken place on neutral ground. Unfortunately, it’s not to be, according to Chinese Vice Foreign Minister Li Baodong -- a short-sighted stance if there ever was one.
Singapore gets vote of confidence from U.S. executives.
For the very first time, Singapore has become as the favored investment destination in Asia for American companies. In 2012 more U.S. foreign investment flowed into the tiny city-state -- which has an economy smaller than Portugal’s -- than Australia, Japan, and even behemoth China. FDI rose 17 percent to $138.6 billion, and may exceed $50 billion for a third year in a row in 2013. How is Singapore doing it? By offering incentives and tax cuts to lure the likes of Exxon Mobil and Google. Proof that if you build an economy boasting great infrastructure, legal certainty and limited red tape, American dollars will come.
(William Pesek is a Bloomberg View columnist. Follow him on Twitter.)