Global rout triggers outflows in warning to Asian banks

Bloomberg

The abrupt selloff on global markets is happening as investors pull out of emerging markets at the fastest pace since the 2016 US presidential election.
The withdrawal, largest in Asian countries, is a reminder that even as the region fuels the world economy’s best performance in years, it remains vulnerable to the whims of market sentiment.
It could also put the brakes on a nascent shift towards raising interest rates, as monetary authorities were using a window of robust exports and solid demand to adjust policy in line with their global peers, according to Rajiv Biswas, chief Asia-Pacific economist at IHS Markit in Singapore. South Korea and Malaysia have already tightened and others, including the Philippines, are tipped to follow.
“During this period of high markets volatility, Asian central banks may temporarily postpone planned policy rate hikes until markets calm down,” said Biswas. “Asian central banks may also intervene in currency markets to smooth sharp fluctuations in currency markets due to volatile capital flows.” The Reserve Bank of India sold US dollars early on Wednesday to support the the rupee, according to traders.
The market selloff will weigh on the RBI and Bangko Sentral ng Pilipinas, both of which have policy meetings scheduled
for this week, according to Bloomberg
Economics. A sustained selloff could refocus India’s monetary authority on supporting growth, while for the BSP, if the market meltdown results in lower oil prices, it will take a rate hike off the table, according to the Bloomberg Economics team led by Tom Orlik.
To be sure, the outlook for Asia remains robust and there’s little to suggest a near term reversal in an export boom. Inflation is subdued, China’s economy continues to defy the doomsayers and it remains to be seen how sustained the market sell off will be.