Effort To Avoid A Repeat Could Bolster Asia’s ETFs

The ongoing market turmoil is leaving many Asian markets and exchange traded funds (ETFs) with unpleasant flashbacks to their own crisis more than 10 years ago.

Few rejoiced more than Asia when the massive intervention by both American and European governments was announced. But they haven’t forgotten that an economy’s pain hangs around a lot longer than a market downturn.

No country can hope to be void of a global financial meltdown, but the region may not face the sort of meltdown experienced in 1997-1998. In many ways, the region is far better placed to withstand the present shock. Its banks are stronger, its currency regimes less rigid, its foreign-exchange reserves bigger. But the past decade of globalization has taken every country deeper into integration of the global economy, reports The Economist. Prospects for growth are more bleak.

Asian governments are working hard to calm fears. In China, the stock market has lost two-thirds of its value since last October; the property market is wobbling and growth is slowing. These trends all predated the latest panic, so the government has had to go further to shore up confidence.

Japan’s money markets aren’t as stopped up as those in the United States and Europe, but authorities are taking few risks. Backed by $1 trillion of reserves, the Bank of Japan has promised unlimited dollar funds to the markets, as well as measures to support regional banks.

• BLDRs Asia 50 ADR Index (ADRA), down 41.4% year-to-date (black line)
• iShares MSCI EAFE (EFA), down 42.1% year-to-date (green line)

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