How the Asian Stock Market Has Been Affected

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The Asian Financial Crisis of 1997 marked a new era in international trade relations. On one hand, Asian markets were experiencing an unprecedented boom with almost all leading economies in the region, except for Japan. Short and long term intra-regional relations between global markets and Asian economies on the one hand, and Asian markets themselves on the other, appeared in the wake of the crisis. And when the smoke cleared, there emerged two major winners and losers – the Asian Tigers and Asian juggernauts.

An Overview

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The story starts at the turn of the millennium. The Asian Tigers were world leaders in international trade and were considered as the preeminent economic power. These countries included China, Japan, India, Malaysia, South Korea, and Taiwan. A couple of decades later, this group of strong economies started to buckle. A series of stock market disasters – the 1997 Asian financial crisis, the 1997 Asian Currency crisis, the 1997 Asian wave – marked the demise of the once mighty Tiger teams.

The culprit was the US dollar. The strong US dollar eroded the strength of Asian currencies that served as their support in international trade. The domino effect was disastrous for these nations. In addition, there was a severe lack of government spending and industrial base growth. The result? Slow economic growth coupled with massive unemployment and capital flight.

Asian Stock Market News

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And then there was the Asian fiscal crisis. This is perhaps the worse in the history of international trade. In the 1990s, Asian countries tried their best to balance their books and boost their economy. However, they were caught in a fierce race with the US to maintain the strength of their currencies. To make matters worse, a series of unfortunate events – the Japanese economy collapse, the 1997 Asian wave – made things worse for Asian economies and forced them to devalue their currencies.

Now, looking at the state of play in Asian stock markets, it is easy to see how the situation has become so dire. Some analysts argue that the recent slump was caused by a poor performance by Chinese stocks. On the contrary, the poor performances of Chinese stocks were also contributed to the US interest rate decision, which resulted to a strengthening of the dollar and US interest rates. Meanwhile, the country’s slowing economy was a result of the global recession. This is why the Asian stock market has tumbled to its lowest levels ever.

If the US and the rest of the world are able to control the collapse of Asian economies, then it would be a boon for the American economy. On the other hand, if a nation such as China could stumble and lose its grasp over the American dollar, it would spell disaster for American economic interests all over the world. China is one of the largest trading partners for the US. As such, if China is unable to maintain its economy while US continues to grow, the US will most likely suffer from the effects. It is therefore clear that the weakening of the Asian market is a serious threat to America’s economic stability.

Now that the economic status of Asian countries is affected, it is obvious that the Asian financial system will undergo changes. This would affect every country in the region, as each country will have to adjust to the new set of rules and regulations. This is the main reason why Asian countries continue to grow at a rapid pace despite the recent crisis. The only way for a country to overcome this problem is to re-examine its own economic strategies and reform its government, if necessary. It will be very difficult for Asian countries to regain their foothold in the global financial market if they don’t address these issues head on. Besides, the economic and political reforms that each country must undertake will be a substantial cost to the country, as it may entail increased taxes for citizens and higher oil prices.

Bottom Line

The slowdown in Asian economies has been felt by investors all over the world. Traders have become increasingly cautious about putting their money into Asian stocks due to the troubled economy in that region. However, despite the current turmoil, the Asian stock market has remained largely resilient and stable. The future of Asian economies depends on how well the governments in those regions to manage their problems. If they take this issue seriously, then the Asian stock market can serve as a major force for economic growth in countries such as India and China, giving them much-needed support as they tackle their economic issues.

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