Are emerging markets decoupled or not decoupled from the stresses afflicting developed markets? There was more evidence on Monday that they are less decoupled than they would like.
It comes in a study from the Bank for International Settlements which looks at the reasons for contractions in cross-border bank lending from DMs to EMs in 2008 and 2011. While EM factors had a big part to play in the first contraction, it finds, the contraction in lending in 2011 was almost entirely determined by problems in the countries of origin – especially in Europe. Read more
Frederic Neumann, HSBC’s Hong Kong-based economist, has been visiting clients in Europe where the view, apparently, is that Asia is getting dull, offering few obvious risks and little imminent reward. Nobody likes their own patch to be seen as unexciting, of course, but in a note to clients on Monday Neumann presents four reasons why investors should not underestimate Asia’s ability to surprise. Read more
Ewald Nowotny, Austrian central bank governor
The Austrian authorities are getting tough with their banks over eastern Europe.
On Monday, the central banks announced strict new capital rules and lending curbs that will make it harder for the banks to lend to CEE. It should help to protect Austria’s AAA credit rating. But it will do little to restore confidence in the more vulnerable economies of eastern Europe, starting with Hungary. Read more