Challenges and Opportunities from Financial Globalization for Fund by ygy16679

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									Challenges and Opportunities from
 Financial Globalization for Fund
Managers and Policy Makers in the
       Asia-Pacific Region

    Presentation by Mr. Takatoshi Kato
        Deputy Managing Director
       International Monetary Fund
            December 12, 2007




                                         1
Challenges and Opportunities from Financial
              Globalization
Today, I will cover two main sets of issues that are
relevant for the Asia-Pacific region:
   • The factors that will spur continued and
     successful growth of the asset management
     industry, and
   • Lessons and challenges from recent market
     turmoil



                                                       2
  Pension funds assets have grown rapidly
      Growth in Pension Funds Assets, 2005-06 (percent per annum)


60

50

40

30

20

10

 0

-10
       Korea       China     Australia     Hong      Thailand Indonesia   India   Japan Singapore
                                           Kong
                                           SAR
        Source: OECD's Pension Markets in Focus, November 2007.

                                                                                                    3
     The Asia Pacific Region exhibits wide
 variety in terms of the size of capital markets
                                   Capitalization in Selected Countries
                                           (In percent of GDP)
1000
900                                                                                                Stock market capitalization
800                                                                                                Total debt securities
700
600

500

400
300

200
100

  0
       HK SAR Singapore Japan              Malaysia Australia           Korea         India Philippines Thailand     China Indonesia

           Sources: Bank for International Settlements (BIS); Bloomberg; and IMF, World Economic Outlook database.
                                                                                                                                       4
                                 Better infrastructure reduces volatility of
                                                capital flows
                                                         Regulatory Quality (2 is highest)

                                   6
Inflow volatility/inflow level




                                   5
                                                                 Indonesia
                                   4                                                                           Hong Kong SAR


                                   3                                           Sri Lanka


                                   2
                                                                           Philippines     Malaysia
                                   1                                                               Korea           Singapore
                                                                       China
                                                             Vietnam

                                   0
                                                                           India


                                    -1.5          -1         -0.5              0           0.5             1    1.5            2
                                                                                                                                   5

                                 Note: Inflow volatility measure in absolute values.
          Australia’s capital markets have shown
                       robust growth
                                     Capitalization in billions of U.S. dollars

2500

                    Stock market capitalization
2000
                    Total debt securities

1500


1000


 500


    0
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Sources: Bank for International Settlement (BIS); and Bloomberg.

                                                                                  6
         Gross capital flows have surged recently
                                                 (In percent of GDP)


10
                                                                              Emerging Asia
 8

 6

 4
                                                                        Emerging Asia (exc HKSAR and
 2
                                                                                 Singapore)

 0

-2

-4

-6
         1998         1999          2000         2001         2002    2003    2004      2005     2006
     Sources: Staff estimates based on IFS, CEIC, and WEO database.


                                                                                                        7
Exchange rates have appreciated for many
               countries
      Real Effective Exchange Rates for Selected Asian Countries
                         (January 2005=100)
130


120


110


100


 90
                Japan                      Korea
                Singapore                  Indonesia
 80
                Malaysia                   Philippines
                China                      India
 70
       Ja      M    M      J     Se      N   J    M    M      J     Se      N   J    M    M    J    Se      N
          n-     ar   ay u l-      p - ov- a n-     ar   ay u l-      p - ov- a n-     ar   ay u l-   p - ov-
             05 -05     -0
                          5
                              05      05   05   06 -06     -0
                                                             6
                                                                 06      06   06   07 -07 -07 07         07   07

 Source: IMF, Information Notice System.
                                                                                                                   8
       Asset-backed securities’ spreads have
                     widened
           Asset–backed Securities Spreads, 2007 (in basis points)

9000

8000           AAA
               AA
7000           A
               BBB-
6000

5000

4000


3000

2000

1000


   0
  Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07
                                                                                        9
           Liquidity has declined substantially,
           reflecting global funding pressures
                                            Global Funding Pressure
                             (In percent, average of Euro area, U.K., and U.S. rates)
6.00
                                                              ECB €95 bn                             50 bp Fed cut
                                                         liquidity injection
5.75


5.50


5.25                Average 3-month LIBOR rates


5.00


4.75
                                            Average policy rate

4.50
                                               May-07
                Feb-07


                         Mar-07


                                   Apr-07




                                                                                   Sep-07




                                                                                                          Nov-07
                                                                                            Oct-07




                                                                                                                   Dec-07
                                                                          Aug-07
       Jan-07




                                                        Jun-07


                                                                 Jul-07




                                                                                                                            10
Demand for structured products in Asia has
           been relatively low
 Buyers of Asset-Backed Securities Collateralized Debt Obligations
                    (In billions of U.S. dollars)

80
                           By Region and Rating
70

60     Senior (A to AAA)
50     Mezzanine (BB to BBB)
40     Equity
30

20

10

 0
       Asia/Australia             Europe          United States
                                                                     11
      Macroeconomic risks remain
   Sharper-than-expected U.S. slowdown
    • Trade and financial linkages with Asia-Pacific region
      remain significant.
   Lower capital inflows to the region
    • The cost of capital may rise, and access to capital
      may be more difficult where macro and other
      fundamentals are weak.
   Further pressure on oil prices
    • Supply capacity remains tight and demand is
      growing rapidly.
    • And higher energy and other commodity prices
      could add to inflationary pressures.                    12
    The recent turmoil suggests a number of
      priorities for national authorities and
                standard setters…
   Ensure investors and supervisors have accurate and
    timely information on risks.
   Consider the need to widen the perimeter used by
    supervisors and financial institutions to assess risks.
   Assess whether “originate and distribute” model dilutes
    credit discipline.
   Examine role and effectiveness of ratings for credit
    derivatives and structured products.
   But investors and financial institutions also need to
    scrutinize credit and liquidity risks of investments and
    collateral more carefully.
                                                               13
Thank you



            14

								
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