Asia-Pacific Markets Fall Amid Fears of Global Recession

Singapore’s finance minister was dressed casually in a short-sleeved shirt and brown trousers to meet a crowd of citizens that had gathered to meet him in a community hall.

Tharman Shanmugaratnam was quick to reassure the packed room that the global financial crisis would not engulf Singapore and its 4.5 million inhabitants: “I can assure you that our Singapore banks are well-regulated and that there’s no risk.”

He added there was “no reason whatsoever to have a run on the banks” and added that the banks had “good risk management.”

“Frankly, you need not worry about how solid our banks are -- your money is safe, we’re not in the same situation as the US and you need not panic,” he insisted.

Massive losses

Although some experts confirm the minister’s view, Singapore has not been unaffected by the global crisis. Since the beginning of the week, the Singapore stock index has fallen steadily and on Wednesday stocks fell by over 6 percent.

There is a similar trend in Malaysia and Indonesia. On Wednesday, the Indonesia Stock Exchange suspended trading as stocks plunged by over 10 percent.

The Indonesian President Susilo Bambang Yudhoyono had called for an emergency meeting to prevent such a scenario on Monday but to no avail.

Meanwhile, in Thailand on Wednesday shares lost over 6 percent as the political crisis refused to abate.

Banks safe so far

So far, the region’s banks seem in the clear with no collapses as yet. Kevin Scully, an independent analyst, thought this would remain the case.

Since the Asian financial crisis of 1998, “the banks have been insulated. There have been a lot of capital controls so a lot of local banks have not been able to invest overseas.”

In a sense, this protected them and they were also able to accumulate reserves because of the “commodity boom -- especially in palm oil and other natural resources.”

Scully also thought that because most of the region’s credit institutes had not invested more than two billion euros in American real estate, they would survive the current crisis in the US.

Gloom for economic growth

But he was not so optimistic about economic growth -- because Southeast Asia produces a lot of exports, a global slowdown would have direct consequences for regional economies, he said.

Whereas until June of this year, most regional economies were forecasting GDP growth of 4 to 6 percent for 2008 and 2009 they are now predicting 0 to 2 percent growth only.

Scully thought the economies could even go into negative growth if the US went into recession.