China Heading for Financial Crisis in 3 Years, India Has Nothing to Worry: Report

New Delhi: Hong Kong and China are running the gravest risk of a financial meltdown within a span of three years.

The only Asian economies in the safe zone are India and South Korea, said a report by Bloomberg that quoted a study by Nomura Singapore Ltd.

Emerging markets are in far greater danger of a financial crisis than their developed peers, said the report. It said Hong Kong has the most to fear.

“Hong Kong and China are the only constituencies in grave danger of a financial crisis or sharp drop in domestic demand in the next three years, with the red flags more prominent for Hong Kong than even during the peak of the Asian financial crisis in 1997-98,” according to the research note published Wednesday by Nomura’s Rob Subbaraman and Michael Loo.

The results continue to show that emerging economies are considerably more vulnerable than developed countries to credit and financial stress, Subbaraman and Loo wrote.

Taking some cues from work by the Bank for International Settlements, the Nomura economists tested the reliability of indicators used to gauge conditions across 30 countries dating to the early 1990s and separated equally among Asian economies, emerging markets, and developed markets.

Thailand, Colombia, and the Philippines are the closest to the unfavorable threshold at 21, 20, and 19, respectively. The only Asian economies among the 14 that have zero signals flashing red are India and South Korea.