Frederick Neumann, HSBC's chief economist, draws parallels between today's financial environment and the conditions leading up to the 1997 Asian financial crisis. He points out that U.S. Treasury yields have risen significantly, from a low of 0.5% in August 2020 to approximately 4.79% recently, mirroring the yield increases seen before the 1997 crisis.
Additionally, the Japanese yen has depreciated sharply, similar to its decline in the mid-1990s, raising concerns about potential market interventions. Neumann also highlights the current tech optimism surrounding AI, akin to the internet boom of the 1990s.
However, he emphasizes that the differences between the two periods are more significant; unlike in the 1990s when Asian economies were capital importers, they are now capital exporters.
This shift means that while higher U.S. funding costs and a weaker yen may not pose the same level of risk as before, Asia's reliance on the AI hardware boom could create 'demand vulnerability.' If U.S. bond yields continue to rise or if the yen destabilizes funding markets, demand for Asian exports could decline, threatening regional growth