But there are areas that still merit concern. This movement of capital from riskier Asian assets into European and US investments has diminished the prospect of asset bubbles emerging in Asia. The shift has grown stronger as emerging market growth has been tempered by capital outflows to rich countries, largely because of the US Federal Reserve’s move to begin the lengthy process of normalising monetary policy by winding down quantitative easing (QE). To renew its commitments to a more liberal reform agenda, but a region-wide move towards greater market openness has not been quick, and investors will need convincing. The shift began when governments in many Asian countries, particularly in India and Indonesia, manipulated markets in 2012-13, leading to a variety of distortions, from state-directed lending to capital controls, trade protectionism and import substitution. Having replaced economically redundant governments with more invigorated administrations. Yet, economies under threat from a decline in investment funds are already fighting back - led by Asian tigers as they return from the ballot boxes,
Nowhere is this rebalancing becoming more apparent than in Asia, where investors’ concerns have been heightened by slowing growth and plummeting currencies, which have exposed economic weaknesses in some emerging economies, such as in India and Indonesia. Investors are responding to this shift - and rediscovering that, in real terms, the US adds more dollars’ worth of GDP to the global economy than China Canada adds more than Brazil and France more than Nigeria. While the rate of growth in non-OECD (Organisation for Economic Co-operation and Development) economies is expected to still outpace those of the OECD countries, the gap between them has shrunk since the global financial crisis. The economic balance between developed and emerging economies is shifting, reversing trends of the past five years.
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