End of QE will impact the market severely: economist
By Ted Chen, The China PostTAIPEI, Taiwan -- Recent market rallies mounted in the Taiwan market may come to an abrupt halt, as the end of quantitative easing measures in the U.S. approaches, said an economist yesterday.
October 20, 2013, 12:01 am TWN
Economist Ma Kai (馬凱) yesterday deemed the U.S. debt ceiling crisis a non-issue, stating that the impending end of the U.S. government's quantitative easing (QE) measures remains the greatest threat to global economic prospects.
It is unlikely that the U.S. government will allow the debt crisis to deteriorate, said Ma, who expects media coverage to return to the more dire ramifications of QE's impending end once the ongoing American political kerfuffle concludes. In this vein, Ma stated that the recent spirited rallies mounted in the Taiwan market may be short lived, as the gains recorded over the past few trading sessions are artificially propped up by a tremendous influx of so-called “hot money,” whose paths are fickle and transient.
According to Ma, once QE measures end, the value U.S. treasury bonds will depreciate greatly, causing yield rate to surge significantly — a condition expected to draw the return of hot money back in the U.S.
Due to lagging performance results in the developing markets, the flow of hot money has been returning to the U.S. at an alarming pace, said Ma, who added that the retreat of capital has been exacerbated since the Fed's announcement in May hinting of the impending end of QE measures. Ma stated that in particular, foreign capital has been observed to be fleeing from South East Asia, to the more developed North Eastern Asian markets.