Kazuhiro Nogi | AFP | beautiful pictures
The widely anticipated move by the US Federal Reserve to accelerate the end of its bond-buying program is unlikely to lead to volatility in Asian markets, according to a United Overseas Bank strategist. strategist from United Overseas Bank.
The US central bank will hold its monthly monetary policy meeting this week where it is expected to ease bond buying starting at 30 billion dollars a month in January, compared with $15 billion now. The Fed is also expected to start raising rates in 2022.
In 2013, the Fed sparked a “furious fury” when it began to cut its asset-buying program. Investor panic triggered a bond sell-off, sending Treasury yields spike. As a result, emerging markets in Asia suffered from strong capital outflows and a sharp currency devaluation, forcing central banks in the region to raise interest rates to protect their capital accounts.
“Asia in general, so far, all central banks are very well prepared. Foreign exchange reserves are at a record high. The view on Fed tightening has been well communicated. We can handle a bit more on so-called outflows Heng Koon How, head of market strategy at UOB, told CNBC on “Squawk Box Asia” on Monday.
The Fed’s bond-buying program was enacted in early 2020 to help the economy and financial markets cushion the impact of the coronavirus pandemic.
Heng Asia’s strong trade fundamentals are also likely to support countries in the region and help them weather the Fed’s cut in its bond purchases.
“Asia is on strong footing for trade and that is also guided by China. Moving towards a Fed rate hike on a steady and strong note,” he noted.
Alexandre Tavazzi, global strategist and head of Asia CIO at Pictet Wealth Management, has a similar note, saying that the growth outlook is promising for countries in the region.
This is especially true for Association of Southeast Asian NationsTavazzi said economies have affected economies because of the pandemic.
“Their economy suffers in 2021 because of Covid,” he said, adding that ASEAN is one of the few bright spots in the world where the growth outlook is “fairly strong”.
“ASEAN countries stand out. This is one of the few regions on the planet where the growth rate in 2022 will be higher than in 2021,” Tavazzi noted.
