The BIS’s Unsettled Loan Lift
The BIS in its March quarterly publication marked the “end of a high capital inflow period” in Asia and Latin America at the same time cross-border lending rose over $150 billion, or 6 percent, through end-2010 to all emerging market regions including previously-shunned Europe. Exposure in the troubled MENA area had also increased particularly at UK and French banks, although at less than 3 percent of their worldwide book. For the group, inflation has intensified with rapid GDP and commodity price increases as “gradual steps” tighten monetary policy. Among the BRICs, only Brazil’s interest rate is positive at 5 percent, while the rest have negative real benchmarks that discourage savings while currency appreciation is also resisted with reserve accumulation. The global stock of claims topped $30 trillion as of last year’s Q3, in comparison with the pre-crisis apex of $35 trillion. Non-bank lines representing one-third of the total are typically less volatile than interbank ones, according to the review. Over half the developing economy expansion went to the Asia-Pacific, with $40 billion alone to China, well above the combined sum to India, Korea and Taiwan. In Latin America as a whole, the record upswing for the period at $45 billion just bumped China’s, with two-thirds going to Brazil, followed by Mexico and Peru around the $4 billion mark. Europe improved for the first time since 2008, with Russia up $10 billion after seven quarterly declines, beating usual favorites Poland and Turkey. However Hungary activity fell 2 percent at roughly the same clip as average peripheral Europe engagement, although Ireland’s sank 5 percent as it headed for an IMF-EU bailout. Saudi Arabia and South Africa were the main Middle East-Africa recipients, while together Egypt and Tunisia credits outstanding were only $50 billion.
Developing country international bond issuance was constant for Q4 at $40 billion, but emerging Europe slumped while Asia transactions doubled. Latin America and MEA, respectively, advanced and dropped 10 percent. On derivatives, the Asian contingent of Hong Kong, India and Korea saw 15-25 percent growth in equity index futures. Korean share contract trading has remained vibrant despite the imposition of currency forward restrictions and reactivation of bond withholding tax. The central bank has again hiked the benchmark rate 25 basis points, as officials intervene to support the won after selloffs in the aftermath of trade partner Japan’s natural and nuclear disasters. The country had already been facing a nuclear threat from the North as the fallout spreads from dual sources.
