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10 Years Later, Global Markets See Asia's Star Rise As U.S. Clout Wanes

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By WILLIAM PESEK, Bloomberg News

Published: December 27, 2007

You would expect a year marking the 10th anniversary of the Asian crisis to be hectic, and 2007 didn't disappoint. Coup attempts, subprime fallout, terrorist attacks, scandals, volatile stocks, elections, you name it.

Yet the biggest news wasn't a singular event; it was a not-so-subtle shift in Asia's role in global markets.

Growth in Asia boomed as more developed regions plodded along. As the dollar lost its footing, currencies such as the Thai baht surged 18 percent and the Indian rupee jumped 15 percent. As the United State's clout waned, China blanketed the globe, grabbing resources, making new friends and ignoring Treasury Secretary Henry Paulson's demands to revalue the yuan.

The real shift, though, was about purse strings. A decade ago, Asia's financial meltdown set in motion a series of humiliations that forced governments to allow Western investors to buy assets at knockdown prices.

Now, it's Wall Street's turn. Unfolding troubles in credit markets have the West holding its hat out to cash-rich Asian states.

As 2007 draws to a close, some awards seem in order for the countries and people who, for better or worse, helped shape Asia's year. Drum roll, please, for the awards:

•"Money Talks" Award: To Asian and Arab governments awash in riches from rising currency reserves and oil prices. Two years ago, Dubai couldn't buy U.S. ports because of "national security risks."Now, few in the West are questioning selling off stakes in U.S. financial institutions to Dubai, China, Singapore and others.

You'd think a nation losing control of its financial infrastructure is at least as big a risk as a couple of ports. But with credit markets reeling, it's hard for Citigroup to decline a multibillion-dollar lifeline from Abu Dhabi Investment Authority. Or for Morgan Stanley and Bear Stearns Cos. to say no to state-linked Chinese money. Expect such deals to come under greater scrutiny in 2008.

•"Never Mind" Award: To Bank of Japan Governor Toshihiko Fukui, who for nearly five years threatened to raise interest rates amid daily predictions that deflation had been defeated. It turns out he may need to cut rates as economists buzz about a Japanese recession in 2008.

A few years ago, Fukui was toasted by financial magazines as the world's best central banker, even better than Federal Reserve chairman Alan Greenspan. On second thought, given the subprime mess Greenspan let fester, Fukui isn't looking so bad.

•"Toxic Shock" Award: To China, which triggered a global search for goods not made within its borders. How devastating 2007 was for the world's factory floor was summed in a recent cartoon by David Horsey of Hearst Corp. In it, a boy sitting on Santa's lap says: "I want toys that aren't toxic and aren't made by little kids in Asian sweatshops." Santa replies: "Wow! You REALLY believe in Santa Claus!"

Rather than clamping down immediately on makers of contaminated food, tainted pet products, defective toys, fake mineral water and other quality-control nightmares, China blamed the media for hyping the story. In 2008, we will see whether the Made-in-China brand stays tainted.

•"Defying Gravity" Award: To Asia's equity markets, which had yet another stellar year. While China's stock bubble got most of the focus - the benchmark CSI 300 Index was up 163 percent in local currency terms as of Dec. 21 - double digit gains were widespread.

As of Dec. 21, shares in Australia, Bangladesh, Hong Kong, India, Indonesia, Korea, Malaysia, Pakistan, Philippines, Singapore, Thailand and Vietnam were up 20 percent or more. With Asian currencies set to rise further, 2008 could be another solid year for the region's equities.

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