Asia-Pacific Liquidity Increases Outstrip Global Growth

March 16, 2015

Against a backdrop of increasing global liquidity, the Asia-Pacific region has seen a rapid build-up in cross-border bank credit during the past 18 months, according to Bank of International Settlement’s most recent report on global liquidity indicators. 

 

Global Liquidity Shows Steady Growth

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Bank of International Settlements: Global liquidity: Selected Indicators (Feb 7, 2015)

 

US dollar cross-border credit to non-bank borrowers grew 9.2% y-o-y at the end of September 2014 to reach a total of $9.2 trillion. In contrast, cross-border credit to non-banks grew 21.4% y-o-y, while domestic credit grew 9.2% y-o-y. 

 

This is, in part, explained by loose global monetary policy and Asian investors increased activity on the regional and global scene. What’s most concerning is that credit growth is growing, while economic growth for the region is slowing, indicating that the ‘bang-for-a-buck’ of credit loans is slowly diminishing. 

 

Asia-Pacific Liquidity Expands at a Faster Pace, No Sign of Let-Up

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source: Bank of International Settlements: Global liquidity: Selected Indicators (Feb 7, 2015)

 

Also, the news that global house prices are starting to pick up, plus widespread policy loosening in Asia Pacific, highlights a concern that - in the absence of investment opportunities and a glut of credit in the global economy - investors will turn, again, to Asia’s real estate sector and heavily inflate pricing and open themselves up to the same risks that they faced at the time of the last financial crisis. We all know how that turned out, can we be sure that governments have put measures in place to stop the same thing happening again?  

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