Ten years on from the financial crisis in Asia which started on 2 July 1997, new research from HBOS shows the region has largely recovered.
During the crisis, South East Asian currencies fell sharply, stockmarkets slumped and economies went into recession. However, the research shows how markets have picked up since then by tracking economic indicators including GDP growth, inflation, unemployment, exports and official interest rates as well as stockmarket and currency performance.
Key findings include stockmarket returns have more than recouped their losses during the crisis when they fell on average by 47% and South East Asian markets are now on average 73% above the pre-crisis levels of June 1997.
South East Asian stockmarkets have on average delivered a 124% rise in share prices over the past five years with Indonesia recording the biggest increase of 265%. The Indian stockmarket has risen 324% in the past five years; the strongest increase of the other emerging Asian markets.
The Taiwanese market is the only Asian stockmarket where values are still below mid 1997 levels. It is down 12% due to the impact of the crisis as well as the technology sector’s collapse in 2001.
The research found a better financial framework and comparatively high economic growth rates have attracted investors back to the region and seen returns surge. However, the report also showed Asian economic growth rates are more than one percentage point lower than before the crisis although growth rates are improving.
Martin Ellis, Halifax chief economist, comments: “Asian stockmarkets have seen stronger gains in the past five years than in the five years before the Asian crisis despite lower economic growth rates than prior to the crisis. Importantly, economic growth in the region is on an upward trend, which is helping to attract back investors and drive up stock prices.”
The research found South East Asia bore the brunt of the Asian crisis while the slowdown in growth was less pronounced in other emerging Asian markets due to the strength of the Chinese economy. The economies most affected were Indonesia and Thailand.
However, a financial crisis on the scale of that seen in 1997 is unlikely, the report suggested, as Asian countries have built sizeable foreign exchange reserves to protect themselves.
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