ADB Sees Capital Inflows a Risk to Asia as Bond Market Grows 12%

Capital inflows into emerging East Asia risk flooding the region with cash, creating asset bubbles, as investors seek higher returns from the fast-growing economies, according to the Asian Development Bank.

Outstanding local-currency debt in the region rose 12 percent to $6.5 trillion in 2012, and increased foreign participation has reduced yields, the Manila-based lender said in its quarterly Asia Bond Monitor released today. Authorities have taken measures to curb inflows, with Taiwan’s central bank telling lawmakers in a March 15 report that global “hot money” has overtaken economic fundamentals in determining the direction of Asian currency and stock markets.