Asian economies are keeping a watchful eye over Wall Street due to the recent struggles in the financial sector. Businesses all over Asia are starting to wonder how the U.S troubles will effect them. Even before the past weeks events larger Asian economies like Japan, China, and South Korea were starting to feel the effects of the slow down occurring in the United States and European Markets.
Asian economies still have a large dependence on western markets and the recent struggles have weakened exports. Western banks are struggling with billions of dollars in bad loans and mortgages accumulated from foreclosures. This has caused lending to tighten dramatically around the world. Global markets are still weary after witnessing one of the worst weeks in U.S financial history. Insurer AIG inc. was bailed out by the federal reserve, Lehman Brothers Holdings Inc. filed for bankruptcy, and Bank of America bought Merrill Lynch & Co.
Many are bracing themselves for a struggle in 2009. Chinese exporters are already seeing decreased demand from American markets. There has also been a large decline in consumption and investment in Asia. Many businesses in Asia are starting to turn their focus to domestic markets to offset the global crisis.
Is the worst over? Or is this just the beginning of a worldwide financial meltdown?
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Just to add a more personal perspective on the impact of the US financial crisis on Asian businesses/households:
I spoke to my mom today (she's in Indonesia) and she said that after what happened in the US, the value of some shipping stocks they'd invested in had plummeted (a sign that the ripple effect has hit smaller local companies as well, not just major corporations. Maybe the fact that it's a shipping company is also indicative of an expected decrease in trade?). They'd lost about $10,000. She also said we were going to have to tighten our belts and focus on saving more.
While my family alone hardly counts as an indicator of the economy, if you imagine that millions of families across Asia experience the same thing and take the same precautionary actions, then that could have an impact on the regional economy. Less consumption, more savings, and a hesitancy to invest in stocks is not optimistic news for Asian businesses. And while it's good that some of them are focusing on domestic markets, globalization has made a ripple effect inevitable. The companies that survive are those with enough cash reserves, frugal means of spending, and those who can find orders to replace the fall in Western demand. Basically, those with enough 'padding' to survive however more lean years are left. (Of course, those things are easier said than done. But who says getting through a recession is easy?)
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