Choi Hee-nam, director of the International Financial Policy Bureau of the Ministry of Strategy and Finance, emphasized that macroeconomic measures should come into play to cope with increasing capital market uncertainties at an international conference held at the Westin Chosun Hotel in Seoul on January 21. Titled “Challenges and Opportunities Following the Development and Integration of Asian Capital Markets,” the meeting was hosted by the Korea Capital Market Institute, the Asia Development Bank, and the Peterson Institute for International Economics.
“More and more funds are flowing from emerging markets to advanced economies, and from bonds to stocks in the wake of the Fed’s tapering of its quantitative easing policy,” he explained, advising that the Chiang Mai Initiative Multilateral (CMIM) should be stepped up, since Asian countries have taken up a large part of the global financial crisis. The size of the CMIM has been increased from US$120 billion to US$240 billion after the ADB annual meeting in 2011, which took place in Manila, the Philippines.
“The combined foreign exchange reserves of the ASEAN+3 region is less than 5% of the total,” said ADB’s regional office manager Iwan Aziz, adding, “Most backup plans are linked to the International Monetary Fund, with the CMIM being small in size and the utilization being slow progress.” At present, the IMF supplies 70% of the relief fund, and the rest is provided by the CMIM in the event of a financial crisis in an Asian country.
It has also been pointed out that Asian capital markets need to be developed and integrated with one another to deal with the global financial crises that have continued since 1997 in Russia, Mexico, etc. “Financial policy setters in Asia are building financial safety nets to prevent crises and minimize the damage,” Mr. Iwan continued, “In 1997, we came to realize that excessive reliance on banks is something undesirable, and we have been in pursuit of the diversification of financial means since then.” The development based on integration is to serve the same purpose of increasing external resistance, too. A lot of Asian countries were shocked in May, when Fed Chairman Ben Bernanke mentioned the tapering of quantitative easing.