The $28 Trillion Reach of Asian Finance
A new analysis from The Economist has found that East and South-East Asian countries have spent the last 15 or so years quietly amassing a staggering amount of foreign financial assets.
The analysis included the foreign holdings of the 10 largest East and South-East Asian economies, finding that, after what it calls a “buying spree” of foreign financial assets over the last decade, those 10 economies now hold $28 trillion in foreign assets, over three times more than they held in 2005 ($8 trillion) and equivalent to a fifth of the total global assets held by foreigners.
The form of the holdings in these 10 economies has also changed. According to the analysis, in 2005, about half of the foreign holdings in the 10 economies were reserves held by governments and central banks in safe, liquid assets. Today, reserves account for closer to a third of the holdings, while the rest is made up of private portfolios and other “financial flows” that typically come with higher risk.
Why it matters:
According to The Economist, the outsized investments in foreign assets has given Asian institutional investors incredible influence in certain markets. Like Australia, now the third-largest location of assets for Japanese life insurers.
Also consider the influence a country like Taiwan, home to two of the world’s largest and most influential insurers, Cathay and Fubon, could wield. According to the analysis, almost 60% of the assets held by the two companies are foreign investments, up from 30% in 2010.