By Nikki De Guzman:
The Asia Pacific Economic Cooperation (APEC) Policy Support Unit is urging regional policymakers to implement measures to prevent asset bubbles as home and stock prices increased in some of its member countries due to speculative buying, its research arm said.
“There are on-going concerns about the health of public finances and the banking system, especially in Europe, as well as price pressures on property and stock markets,” noted APEC Director Denis Hew.
For instance, home prices in Hong Kong soared by 88 percent compared to 2007 levels, while a hike of 24 percent was recorded in Singapore.
Citing data from Jones Lang LaSalle (JLL), the research unit said that direct investment flow into global real estate is expected to grow by 13 percent to US$500 billion (S$617.2 billion) in 2013 compared to the previous year with a substantial amount likely to go into Asia Pacific.
APEC warned that “since capital flows are volatile, there is a risk that sudden reversal of capital inflows would lead to sharp asset price corrections which could cause detrimental damage to the real economy”.
The report also urged its members to desist from competitive currency devaluations as it could lead to bigger trade imbalances.
“It is of concern that the attempt to regain competitiveness may result in a simultaneous currency intervention by monetary authorities,” said APEC’s Policy Support Unit.
“If that were to occur, it would create larger imbalances in the patterns of global trade and investment.”
While no country was specifically mentioned, analysts fear Japan’s efforts to weaken the Yen in order to boost exports could encourage other nations to take similar devaluations, triggering a currency war.
Nikki De Guzman, Junior Reporter at PropertyGuru, wrote this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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