Asian Central Banks Have to Be on Their Guard, Mizuho's Varathan Says

The transcript discusses upcoming central bank decisions in Indonesia and Thailand, and the potential impact of a dovish Fed and trade deals on emerging markets. It highlights the ongoing global economic slowdown and tight dollar funding conditions, emphasizing risks in Asia, particularly related to funding costs and Chinese corporate debt. The role of central banks in managing capital volatility through macroprudential measures is also explored.

What is the potential impact of a dovish hike by the Federal Reserve on emerging markets?

• It will lead to a significant economic downturn.

• It will provide temporary relief and buy time.

• It will have no impact on emerging markets.

• It will cause an increase in interest rates.

What is one of the major challenges faced by markets according to the transcript?

• Surplus in trade balance

• High inflation rates

• Global economic slowdown

• Excessive capital inflow

How might tight dollar funding conditions affect the market?

• They will exacerbate the global slowdown.

• They will have no effect on the market.

• They will lead to increased liquidity.

• They will reduce funding costs in Asia.

What is a potential risk for Chinese corporations mentioned in the transcript?

• Increased competition from European markets

• Rising labor costs

• Challenges in rolling over dollar debt

• Decreasing domestic demand

What strategy should central banks adopt to manage capital volatility?

• Increase interest rates significantly

• Remove all macroprudential measures

• Encourage excessive capital inflow

• Maintain macroprudential measures