[Asia Times] The Asian Asset Bubble - Has it Burst?

Mass selling of Asian assets, equity markets in turmoil, foreign debt-to-GDP ratios skyrocketing

Following the crisis in Thailand and falling profits of major Korean companies, investors worldwide have 

reevaluated their investments in the region. What were once known as “Tiger economies” are now 

experiencing shrinking asset values as investors sold off stocks and bonds by companies that were 

perceived as “financially unsustainable”. Those that were highly leveraged also faced large reductions in 

equity finance as investors fear that a further fall in consumer demand in the region would prompt rapid 

cash outflows in the short term, and insolvency in the long term if companies cannot repay their debts. 

Expert analysts warned that extremely high market to book ratios of large companies thought too big to fail 

will eventually cause an asset bubble burst. Others argue that it has already started. Specifically, the Seoul 

stock exchange fell by 7% today, and a large sugar milling and refining company in the Philippines, the 

Victorias Milling Company (VMC), filed for bankruptcy after investors withdrew their funds in the span 

of 3 days. 


Speculative attacks against Southeast Asian currencies have also intensified. The kip lost nine-tenths of 

its value against the USD, and the Japanese yen plunged a further 6.8% in value on November 1. Most of 

the countries in the Southeast Asian region, save Singapore, experienced skyrocketing debt-to-GDP ratios 

due to falling demand and investment coupled with the high amount of foreign-denominated debt. 

Worsening this is the fact that diminishing external values of these currencies makes it harder for companies

to repay their foreign-denominated debt. Furthermore, with cuts in equity finance, many companies have 

reached out to foreign lending institutions and banks for debt finance, placing a larger strain on the 

country’s total accumulated foreign debt. 


“All it takes is the straw that breaks the camel’s back.” Will famed economist Daniel Adams’ words depict SEA’s 

near future?

Location: Jakarta, Indonesia

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