“While there is no doubt that capital inflows are playing a part in Asian currency appreciation, we see real flows being influential as well, as evidenced by strong and rising current account surpluses in countries such as South Korea, Taiwan and the Philippines, and the improvement seen in China’s trade surplus.” Goh adds.
In any case, “we believe foreign investors in the region will not be as flighty compared to the past. Governance and economic performance has improved in many countries in Emerging Asia, FX reserves have been built up as an insurance buffer and, while some administrative measures may have been undertaken by policymakers, there is no threat of capital controls being put in place.” he reiterates.
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