A summarized presentation on the Asian economic crisis by Sp Jain ( Dubai / Singapore) students. It highlights the key events that took place during the crisis in the late 1990`s

1. By: Saurabh Damani & Vishwesharaya

2. • BEFORE THE CRISIS
• Thailand
• Events
• CAUSES
• Effects of the Crisis on Economies in the
Region
• IMF
• The Global Impact of the Asian Crisis
• Preventing Future Crises
• Placement time :!!!

3.  Tiger economies –
Export oriented and Pegged Currencies
 World bank endorses their spectacular
growth story
 Growth rates of 7% in 1970s to 9% in 1990s
 Chinese devalue Yuan by 50%,US Dollar
appreciate 40% against Yen.

4.  Capital Inflows
 0% export growth in 1996
 Current Account Deficits
 Carry Trade
 Asset Bubble
 Currency speculation-role of hedge funds.

5.  Thai stock market dropped 75% in 1997
 By the end of the year, fifty-six Thailand
finance houses are closed down.
 Led to first ever devaluation of an Asian Crisis
currency
 Devaluations vis-à-vis the dollar average 20%
to 30% in Thailand, Indonesia, Malaysia and
the Philippines

6. • Seven high-profile bankruptcies of Korean
conglomerates, such as Hanbo Steel and Kia
Motors
• The Philippines abandons its dollar-peg
Overnight interest rates are raised to 32%
• Indonesian authorities close 16 insolvent
banks
• Malaysia also abandons its pegged exchange
rate

7.  Hong Kong overnight interest rates rise to
280%,
 Hang Seng index fall 23% in three days
 The largest investment bank in Hong Kong,
Peregrine Securities, goes bankrupt

8.  The IMF organises a $58.2 billion rescue for
Korea
 The IMF puts together a $17.2 billion Thai
rescue
 Indonesia finalises a deal with the IMF for
funding that could total up to $42.3 billion

9.  Poor Regulation of the Economy
 Over-Inflated Asset Prices
 Macroeconomic Policy: Fixed Exchange
Rates

12.  Fall in equity markets, foreign exchange markets and rises in
interest rates

13.  Equity Markets

15. • Interest rates
--- Indonesia 300% … Thailand : tightens
monetary policy interest rates peaked at 20%
• Real economy
--severe contraction in real economic activities
--increase in corporate bankruptcies
--devaluation & exports

16.  Financial Assistance : World bank ,ADB
 Fiscal & Monetary policy revision
 Restructuring
 What did it do wrongly?

17. • negative ‘wealth effect’ on investors across the
world Falls in Equity Markets
• International Trade :brake on the growth of
exports from the major economies . 5% of GDP
in Japan, 1½% of GDP in Europe and 3% in the
US .
• Import side : prices slashed
• Foreign Direct Investment : cut back severely
• Economic Growth :constant downward revision
of economic growth forecasts

18. • universal tax on currency transactions to deter
speculation by the markets
• Improve global regulation, which would involve the
IMF, the World Bank and other regulators
• Creating a process of active and transparent
surveillance of borrowing nations
• Creating a Code of Best Practice on social policy issues,
so that financial crises, if they do occur, do not result in
disproportionate increases in poverty within developing
countries.
• enhancing regional surveillance :ASEAN
• the provision of fuller economic and financial
information to the public by governments, financial
institutions, and corporations

19. • Financial contagion
• How does financial contagion occur?
• why is it important, and is there anything
that can be done about it?
• What do you think caused the Asian crisis?
Do you think the affected countries are
now on the right track for recovery?

20. • Following the Asian crisis I would like to ask
you whether there are any ways foreign
investors/risk managers are able to predict
instances of political instability?
• Are the hedging of currencies and the use
of credit derivatives viable options to avoid
losses in the event of currency crises?
• Asian crisis v/s subprime : similarities and
dissimilarities ?