European banks may be selling assets in Asia as prices on sovereign-debt holdings fall, driving down stocks in emerging-market countries and supporting the euro, according to Marc Chandler of Brown Brothers Harriman & Co.
“One of the reasons the euro has been fairly firm has partly been that European banks are thought to be repatriating money from the other emerging markets,” Chandler, chief currency strategist in New York, said today in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “Ironically, the deeper the hole gets in Europe, the more money they have to bring back into Europe.”
Taiwan’s Taiex Index of shares has lost 23 percent this year, and South Korea’s Kospi Index has declined 9 percent, while the Standard & Poor’s 500 Index has lost 1.2 percent.
The 17-nation euro has lost 0.7 percent in 2011, while the dollar has appreciated 1.4 percent, according to Bloomberg Correlation-Weighted Currency Indexes, a gauge of 10 developed-nation currencies.
“When you look at the Asian market, you’re really struck by how much money has left,” Chandler said. “Think about South Korea and Taiwan.”
Europe owns about 10 trillion euros ($13 trillion) of foreign assets such as factories, stocks and bonds that it might sell to help ease its debt crisis, Chandler said.
“Why should people be loaning them money when they can sell off those assets?” he said. “They’re reluctant to sell off those assets, yet it seems to me that they have some assets that other countries would want to buy, say Chinese banks or U.S. banks.”