Only a few months ago, Southeast Asia is still in the state of capital inflows, but with the foreign holdings of local currency denominated bonds, the situation has changed dramatically reversed. For example, according to JP Morgan Chase data, in Indonesia, foreign currency bond holdings, in between August and November fell by 51%, which caused downward pressure on the rupiah, rupiah against the U.S. dollar exchange rate has dropped 7%.
In Thailand, foreign investors over the same period the Thai baht bond holdings reduced by 24%. This capital outflow, "coupled with the already high banking sector's foreign currency loan to deposit ratio is likely to further tighten domestic liquidity," JP Morgan economist Sin Beng Ong in Singapore said. Citigroup Global Markets, said Vietnam in particular, highly dependent on the European participation in syndicated bank loans, because the country's external account weak and the high cost of domestic financing.
Bank for International Settlements in its latest quarterly report that Asia is most vulnerable to the impact of sudden capital withdrawal from the region, partly because foreign banks originating in the capital inflow, a large part of cross-border loans, rather than lending locally.
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