Michael Hasenstab, a San Mateo, California-based portfolio manager who runs the $57 billion U.S.-incorporated Templeton Global Bond Fund, comments on the European Central Bank’s policy to deal with the debt crisis in a statement issued today.
“The ECB has launched its version of quantitative easing which now augments the extraordinarily loose monetary policy of the U.S., Japan and U.K. We now see the most aggressive printing of money in modern times. While this aims to address domestic conditions, most notably to ease the deleveraging of domestic banks, capital cannot be contained within national borders.
“Given open capital markets, abundant global liquidity will continue to flow into Asian markets blessed with strong macro fundamentals, particularly as the region’s currencies still appear largely undervalued.
“Unlike Europe or the U.S., Asia has built up plenty of room to provide fiscal stimulus and to lower interest rates in response to a worsening external environment as debt levels remain low and interest rates were preemptively hiked at the end of the recession.
“For example, Korean government debt levels have been slashed over the last decade and international reserves now well exceed levels seen before the global financial crisis.
“And the largest economies like China, India and Indonesia can count on robust and resilient domestic demand to counter external demand weakness.”