Emerging Markets Cope to Hot Money Seven Methods - Article: 666259 at Isnare.com Free Articles Before the introduction of QE2 Fed, short-term capital has long been tempted by a huge flock of spreads in emerging markets. The third quarter of this year, spread to India, Indonesia, Korea, Philippines, China Taiwan, Thailand, and Vietnam's capital stock totaled 11.5 billion U.S. dollars, and promote the local stock market rose by 8% -23%. Same period, the Korean won, Philippine peso, Thai baht against the dollar there are more than 5% appreciation, India, Indonesia and other countries also showed appreciation of the currency trend. Domestic inflationary pressures that continue to raise interest rates in emerging market countries, while in developed economies to maintain the reality of almost zero interest rates, continue to raise interest rates to the developed economies and emerging market spreads continue to widen. This hot money in emerging markets more attractive, resulting in a vicious cycle. As a result cheap ghd, emerging markets started to worry, the Asian financial crisis a decade ago will repeat itself? Early 90s of last century, the U.S. and Japan implement quantitative easing, a large influx of money came out of emerging markets in Southeast Asia. The mid-1990s, the United States began to increase due to inflation rates, large capital return, leading to the economic bubble burst in the Southeast Asian countries, financial crisis. International Monetary Fund (IMF) representative of the Asia-Pacific Division in Singapore Ravi Balakrishnan said in a research report, although the Asian emerging economies, the rapid expansion of capital inflows, but still did not meet the high traffic in 2007, which means that the next will face more strong pressure on hot money, and in the 1990s compared to the larger round of hot money, but a large scale in emerging markets, including China, India, including the large economies are involved. October, Thailand and South Korea took the lead on the proliferation expressed serious concerns about liquidity. Thai Finance Minister, said Thailand last month to buy foreign bonds, "abnormal" growth; South Korean central bank believes that South Korea must control the "herding" exception under the liquidity growth. Subsequently ghd hair straighteners, the major emerging economies have introduced measures to suppress the hot money. Tricks: exchange rate fluctuations and capital controls Standard Chartered Bank report shows that the major emerging economies have been put forward several measures to address imbalances in global capital flows, including the interception of external capital, set the "Tobin tax" and so on. Response can be roughly divided into two categories, one is to increase foreign reserves and appreciation of the currency of the "conventional means", and the other is the emphasis on capital controls "unconventional means." Any measures to deal awash with liquidity, exchange rate and capital controls are the policy mix, the parties to decide according to different economic conditions in different combinations. To "conventional means" a typical economy of Singapore, the Monetary Authority in October decided to extend the second time this year, the volatility of the Singapore dollar range and slope, from 2% -2.5% increase to 3.5%, to deal with a moderate appreciation of the inflation. From the "unconventional measures" to see, control flow and balance of international payments, dealing with long-term investment and speculative capital, the collection of income tax is a common method of capital. Indonesia and the Philippines have taken the control of flow and balance of international payments approach. Indonesia's central bank to consider extending the current national debt at least 1 month holding period, and the bank deposits from at least 2 months to 1 year. The Philippine central bank said that to relax the foreign exchange outflow of regulations to encourage capital outflows. Thailand's "combined" the more typical: relaxation of foreign exchange had also been taken out of policy, in October of foreign investors from the bond market in Thailand charge 15% interest and capital gains taxes. December 1, Thailand announced a rate hike to counter inflation, the policy fine-tuning. South Korea announced in mid-November, will support the national debt to foreign investors 14% income levy withholding tax profits of the relevant legislation, and prepared to take additional initiatives to respond to changes in capital flows. Policy choice depends on the economic structure Introduction of control measures from the national point of view, rarely have a single floating exchange rate or a single use of capital controls. How an economy with a policy mix, depending on their economic structure itself, the economy can be endogenous release of part of the hot money exchange rate fluctuations, thereby taking a relatively moderate capital control measures; and export-oriented economy, exchange rate stability, especially care about, Therefore, more stringent capital controls to select the means. Citigroup research report that after the QE2 in the environment, India, Indonesia and the Philippines because of its endogenous economic characteristics, can withstand some upward pressure on the currency, which uses a relatively moderate capital controls; while Malaysia, China Taiwan and Thailand export-oriented economy, stable exchange rate will take more direct capital controls. Indonesia, the Philippines and other countries to control capital flows or the balance of international payments approach, Professor of Economics at Fudan University Sun Lijian of it, this is a more moderate approach. Hope to distinguish between the normal hot money to protect the domestic investment is not affected, which in operation more difficult, countries adopt different control programs, we must also be careful not to impede the normal flow of investment to prevent the adverse effects on the real economy. India recently reduced the level of bank debt held by the mandatory requirements, increased liquidity is an example. The next 2-3 years is the key The next two years is to determine whether the emerging economies, the endogenous consumption of self-reliance key to growth, emerging markets and developed countries, whether the decoupling of money, is this the final round of capital controls is a major determinant of effective. According to Merrill Lynch's forecast, with the inflation index of the 2013 European and American countries will start raising interest rates, when the hot money from emerging markets will turn, if the emerging economies to withstand the hot money in the previous pressure to seize the long-term investment inflow, then the possibility of generating large-scale asset bubble will be reduced to a minimum. Emerging economies can not ignore the current round of liquidity in the investment power of the true, the recent investments in customer focus to show that the current round of hot money flow is not entirely expedient, the structure of the global shift of resources has come to the polarization of the investment will become the main trend in 2011. On the one hand, Malaysia, Indonesia and Thailand, the ideal is still the hot money market; the other hand, many customers still want to look for long-term strategic alliance opportunities for greater investment to prepare for the next wave.