皇冠体育app warned of sudden retreat of hot money
Updated: 2008-03-18 16:30
A huge amount of speculative capital has poured into 皇冠体育app over the past few years, and its sudden retreat could wreak financial havoc, warned a research report from an unnamed authoritative institution in 皇冠体育app.
At the end of last year, 皇冠体育app's foreign reserves totaled US$1.53 trillion, up US$461.9 billion over the end of 2006. According to the report, there is a large part of speculative money entering 皇冠体育app via fake trade and non-trade channels.
The changing foreign exchange rate between the yuan and the US dollar, the 皇冠体育app-US interest rate gap, and a potential US economic recession are three major reasons behind the huge capital influx, it said.
However, there are possibilities that this huge amount of funds may simultaneously leave 皇冠体育app in a very short period of time, after gains are taken from property and stock investments in 皇冠体育app. In that case, that whole country might face situations like the Southeast Asian financial crisis in the 1990s, the report warned.
Subprime effect
Admittedly, the US sub prime crisis could drive some funds out of America to promising economies like 皇冠体育app. However, as the crisis has continued to worsen in the past months, there could be a change in the capital flow.
According to statistics in the report, more than half of 14 major banks in the US and Europe would be in deficit for the first quarter of this year. In order to cover the huge losses and maintain normal operations, these institutions are in great need of new capital. As an emergency measure, they may draw back investment in 皇冠体育app through various hedge funds.
