ADB Warns on Rising Risk Environment

Remember my earlier observation of market risks going mainstream?

The point is the IMF, like many other global political or mainstream institutions or establishments, CANNOT deny the existence of bubbles anymore. So their recourse has been to either downplay on the risks or put an escape clause to exonerate them when risks transforms into reality which is the IMF position.

Last week’s formal warning by 3 MAJOR mainstream institutions (BIS, IMF, OECD) on complacency, overvaluation or high risk environment was a shocker.

The Asian Development Bank today issued a sugarcoated or more timid warning compared to her peers on the heightening risk environment (bold mine)

Emerging East Asian local currency (LCY) bond markets continued to perform well as global financial conditions have remained relatively benign thus far in 2014. The region, however, should prepare for possibly tighter liquidity as United States (US) quantitative easing is expected to end in October. More expansionary monetary actions from the eurozone and Japan could offset some of the impact on liquidity conditions caused by the end of US quantitative easing

While the region’s LCY bond markets have been calm in 2014, the risks are rising, including (i) earlier-than-expected interest rate hikes by the US Federal Reserve (ii) geopolitical tensions that push up oil prices; and  (iii) a slowdown in the People’s Republic of China’s (PRC) property market.

If the Asian regional economies has been sound, which in their September Bond Market report (p.5) indicates “region’s economies look  to be better prepared to handle the end of tapering now compared with 2013; current account deficits have narrowed and fiscal deficits have been trimmed”, then why has there been much ado over “tighter liquidity” via "earlier than expected interest rate hikes" by the US Fed? What's the link?

So the ADB reluctantly joins the "warning" chorus, most probably intended as an escape outlet. So if a black swan event happens the ADB can easily say, see "I warned about this"! This makes the ADB a former cheerleader to a fence sitter. Still a change though