A US Federal Reserve rate hike could impact Asian emerging markets. Higher US interest rates may lead to capital outflows from emerging markets as investors seek higher returns in the US. This could strengthen the US dollar and negatively impact emerging market currencies, stock markets, and bond markets. Countries with large current account deficits or high levels of external debt may be particularly vulnerable. The document discusses some potential effects on the economies of India, China, Japan, ASEAN-5 countries, and Gulf economies from tighter US monetary policy.

1. US FED RATE
HIKE:IMPACT ON
ASIAN EMERGING
MARKETS

7. U S F E D E R A L R E S E R V E -
F U N C T I O N S
• C O N D U C T I N G T H E N AT I O N ’ S M O N E TA R Y P O L I C Y.
• H E L P I N G M A I N TA I N T H E S TA B I L I T Y O F T H E F I N A N C I A L
S Y S T E M .
• S U P E R V I S I N G A N D R E G U L AT I N G F I N A N C I A L I N S T I T U T I O N S
• F O S T E R I N G PAY M E N T A N D S E T T L E M E N T S Y S T E M S A F E T Y A N D
E F F I C I E N C Y.
• P R O M OT I N G C O N S U M E R P R OT E C T I O N A N D C O M M U N I T Y
D E V E LO P M E N T.

8. EMERGING MARKETS
• T E R M D E V I S E D I N 1 9 8 1 .
• R E P R E S E N T S T R U E I N D I C A T O R S
O F S O C I O - P O L I T I C A L A N D
E C O N O M I C L A N D S C A P E O F A N Y
C O U N T R Y .

9. ASIAN EMERGING MARKETS
52.39
26.17
6.092
5.946
9.971
ASIAN MARKET – WITH GROWING ECONOMY
Asia Pacific
• Japan
• South Korea
Central Asia
• China
South Asia
• India
Gulf Countries
• Iraq
• Iran
• Saudi Arabia
South East Asia
• Indonesia
• Singapore

10. POINTS OF DISCUSSION
• HUMAN CAPITAL (viz. Population and Labour Force)
• INFRASTRUCTURE (Covering Electricity, Transport, Communications &
Social Media)
• FACTS ABOUT ECONOMY

11. CHINA - POPULATION & LABOUR FORCE

12. INFRASTRUCTURE
2014
2015

13. FACTS RELATED TO ECONOMY
• China is crowned as the World’s 2nd largest economy.
• The per capita GDP Growth is estimated to be 6497.5 USD (51% of world’s average),
in 2015 - (Services – 49% & Manufacturing – 42%).
• The private sector is the main driver of Growth and Employment
• China is the world’s largest exporter and the second largest importer of merchandise goods.
• China is the second largest provider and the top receiver of foreign direct investment (FDI)

14. INDIA – POPULATION & LABOR FORCE

15. INFRASTRUCTURE

16. TYPE – GOVERNMENT &
ECONOMY
• India has been termed as “World’s fastest growing economy” – 7.1% (Aftereffects of
Demonetisation)
• The per capita GDP Growth is estimated to be 1750.6 USD (14% of world’s average),
in 2015 .
• Foreign direct investment (FDI) inflows rose 30 per cent year-on-year to US$ 21.62
billion during April– September 2016.
• India's current account deficit stood at US$ 277 million in April-June quarter, as
against US$ 0.3 billion in January-March 2016 quarter.

17. S. KOREA – POPULATION &
LABOR FORCE

18. FACTS ABOUT ECONOMY
• South Korea has a market economy that ranks 11th in World – it is a developed
market and high income economy.
• The per capita GDP growth is estimated to be 1329 billion USD with an annual growth
of 2.6% in 2015.
• The FDI inflow in the economy is estimated to be 5042 million USD.
• Major contributing sectors in the growth are Manufacturing (40.8%), followed by
Trade, Transport and Financial Services.

19. JAPAN – POPULATION & LABOR FORCE

20. MAJOR FACTS ABOUT ECONOMY
• World’s third largest economy .
• Japan’s working age population (15-64) is going to see a decrease of more than 30%, elderly
population to grow rapidly.
• The nominal GDP is expected to be 4.41 Trillion USD , in 2016 , showing an decrease of 0.2 %
as compared to last year.
• FDI in Japan increased by 6090 JPY hundreds million in Nov, 2016.
• Considered as an industrialized free market economy.

22. .
.
.
.
Impacts

28. ASIAN DEVELOPMENT BANK
• EST. ON 19 DECEMBER 1966
• HEADQUARTERS IN PHILIPPINES
• IT HAS 67 MEMBER COUNTRIES, 48 ARE FROM WITHIN
ASIA AND 19 OUTSIDE.

29. GOALS AND OBJECTIVES
• Promoting economic growth
• Reducing poverty
• Developing human resources
• Improving status of women
• Protecting the environment

30. FUNCTIONS OF ADB
• Provides loans and equity investments
• Provides technical assistance
• Promotes public and private capital investment
• Focused on good governance and macroeconomic
stability

31. WHY ASIA FEARS A FED RATE HIKE

33. I M P A C T O N I N D I A N
E C O N O M Y ?
- D O W N F A L L I N T H E M A R K E T :
- I N F L A T I O N
- I N C R E A S E I N D E M A N D O F D O L L A R
- B A N K I N G , I N F R A S T R U C T U R E A N D I T C O M P A N I E S W I L L
B E A F F E C T E D
- E F F E C T S O N C A P I T A L M A R K E T S ( S T O C K M A R K E T S A N D
B O N D M A R K E T S ) O F I N D I A

34. IMPACT ON JAPAN ECONOMY
• Agricultural stocks led drops on the Topix, with sinking 13 percent after saying it plans
to sell shares to raise as much as 16.8 billion yen ($167 million).
• West Japan Railway Co. rose 3.2 percent, while East Japan Railway Co. added 3.4
percent. Both were among the biggest gainers on the Nikkei 225 on Monday, after
being relatively oversold in the last few sessions.
• Oil explorer Inpex Corp. dropped 2.7 percent after oil prices fell as Iraq seeks to
increase exports amid a global overhang of crude inventories.

35. IMPACT ON CHINA ECONOMY
1. Yuan depreciation against US dollar deepened
2. China forex reserves shrank quickly
3. China’s stock market plunged
4. Beijing started to reverse capital account opening process

36. IMPACT ON ASEAN-5
• The global context for ASEAN economies is
improving-Global emergence
• The Eurozone, is likely to do modestly better
than in 2015.
• Some of the negative factors in the global
economy in 2015 are likely to ease.
• Shielding domestic economy from external
turbulence.
• Singapore’s uplift will be dominated by
external demand.
• Malaysia will probably be more resilient than
given credit for.
• Thailand is likely to be resilient if political
shocks are avoided.

37. IMPACT ON GULF ECONOMIES
• The UAE raised rates on its certificates of deposits by
25 basis points, Saudi Arabia lifted its reverse
repurchase rate to 0.75 per cent and Kuwait
increased its discount rate by a quarter percentage
point to 2.5 per cent.
• Industrial confidence has improved despite these
headwinds. So as long as US Fed fund rate rises come
in tandem with stronger global growth, GCC
economies should be adequately equipped to deal
with the challenge
• Fed rate hike could tighten Gulf credit.
• The Central Bank of Iran announced on December 23
that the two countries will operationalize credit lines
and handle their transactions in Iranian Rials &
Russian Rubles.