Macro Economy: Declining Foreign Exchange Reserves In Emerging Economies

HSBC pointed out that at the end of 2004, foreign exchange reserves of emerging economies were US $1 trillion and 700 billion, and their reserves continued to increase over the past 10 years, which has become the main force in the global economic development.

　　 International Monetary Fund (IMF) data released on the 1 day show that foreign exchange reserves in emerging economies fell by 114 billion 500 million US dollars to 7 trillion and 740 billion US dollars in 2014, which is the first annual decline in emerging economies' foreign exchange reserves since 1995 when IMF began to count the data. At the end of the second quarter of last year, the foreign exchange reserves of emerging economies reached the peak of US $8 trillion and 60 billion.

Analysts pointed out that Emerging economies It may have passed the peak period of storage. foreign exchange reserve It may continue to decrease in the next few months. The decline in foreign reserves may affect the ability of emerging economies to continue to buy us and European debt. Data from 15 leading emerging economies in Holland international group show that in January and February, foreign exchange reserves in emerging economies increased by a decrease of 299 billion 700 million US dollars.

A considerable portion of the capital from the trade surplus, portfolio inflow and direct investment in emerging markets has been refunded to the debt markets in the US and Europe, providing funding for debt driven growth in the developed economies, but this trend may now be reversed.

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Affected by the strength of the US dollar, emerging economies are experiencing the biggest capital outflow in the past 6 years.

Data from Holland International Group (ING) show that in the second half of last year, the total capital outflow from the largest 15 emerging economies amounted to US $392 billion 400 million, which is no better than that during the financial crisis. The group said that in the 2008 to 2009 financial crisis, emerging market capital outflows amounted to only $545 billion 900 million in the three quarter.

The group said the stronger US dollar led to a weaker currency in emerging markets and investors expected the fed to raise interest rates.

IMF also said this week that foreign exchange reserves in emerging markets fell for the first time since 1995.

Without stable capital inflows, emerging markets may be in debt.

According to McKinsey's research report, by the end of 2013, the total debt of emerging markets had reached US $49 trillion, which accounted for about half of the increment of global debt in 6 years.

The McKinsey research report also showed that the proportion of China's debt to GDP increased by 83 percentage points between 2007 and 2013.

It is worth noting that the scale of corporate hard currency bonds in emerging markets has increased. McKinsey expects the bond market to exceed $2 trillion, more than 1 trillion and 600 billion of the US high-yield bond market. These hot money comes from investors with high risk preferences. They are driven by large amounts of money in the emerging markets.

"The United States is changing the way," David Spegel, head of the emerging market bond strategy division of BNP, Paris, told the financial times. "If this continues, long-term high cost financing will corrode the credibility of the issuers. As capital outflows often accompany debt default, we continue to believe that emerging markets will face more difficulties. "

Spegel is not alarmist. With the sluggish real estate prices, the iron ore industry has been in crisis, and China's economic growth has slowed down. Russian domestic investors are also converting rouble assets into US dollar assets. Brazil broke out last month, accusing the government of mismanagement, resulting in high domestic inflation and financial crisis.

This allowed Kay to cut the growth rate of GDP in emerging markets from 4.5% last year to 4%.

HSBC economist Frederic Neumann has noticed that the margin of arbitrage spreads between China and abroad is also narrowing. He said, "despite China's current account surplus, capital outflows in the past six months have reduced China's foreign exchange reserves. As the valuation of RMB is becoming more and more market-oriented, it is hard for China to maintain a larger surplus.