Finance

South Korea is not worried about ‘dramatic’ capital outflows for now, finance minister says

Published

2 years ago

July 17, 2022

South Korea is not worried about ‘dramatic’ capital outflows for now, finance minister says

South Korea’s finance minister has shrugged off short-term dangers of capital outflows from the Asian financial system as gaps in world charges widen.

SeongJoon Cho | Bloomberg | Getty Photographs

South Korea’s finance minister has shrugged off short-term dangers of capital outflows from the Asian financial system as gaps in world charges widen.

Chatting with CNBC on the Group of 20 assembly in Bali, Choo Kyung-ho stated capital outflows from a rustic do not happen because of a single financial driver — resembling rate of interest gaps — since traders are additionally swayed by different components, just like the power of an financial system.

Choo, who can also be the nation’s deputy prime minister, acknowledged there are considerations the U.S. could also be headed for extra aggressive charge hikes, and the widening charge hole might set off capital outflows from South Korea.

“The speed hole has occurred earlier than a few occasions, however we did not expertise any main capital outflows,” he stated Friday, in keeping with CNBC’s translation. “Based mostly on that, I believe capital outflow would not occur merely due to a charge differential.”

Capital outflows happen when property and cash go away one nation for one more attributable to higher funding returns, resembling increased rates of interest.

In June, the U.S. Federal Reserve elevated benchmark rates of interest by 75 foundation factors, its most aggressive charge hike since 1994.

The U.S. Federal Reserve is poised to make one other main charge hike at its coming July assembly with some merchants betting final week on a rise as excessive as 100 foundation factors, after U.S. client inflation hit a 40-year excessive of 9.1%.

Fundamentals are key

“An important issues are an financial system’s fundamentals, whether or not the financial system can present reliability to markets. These are the components that transfer capital,” Choo instructed CNBC’s Martin Soong.

Nonetheless, the South Korean finance minister stated the Fed’s aggressive rate of interest hikes — an try and rein in inflation — remains to be trigger for concern. The rising distinction in borrowing prices between the U.S. and South Korea might speed up capital flows between the 2 nations down the street, he added.

… I’m not apprehensive about any dramatic capital outflows.

Choo Kyung-ho
South Korea finance minister

Latest capital inflows into the South Korean financial system, notably into the treasury markets, have additionally helped mitigate considerations of an outward capital flight, Choo added.

“South Korea’s financial system is experiencing a smaller moderation in comparison with the worldwide financial system. And it’s nonetheless on a restoration path,” he stated.

“That is why I’m not apprehensive about any dramatic capital outflows.”

Final week, the Financial institution of Korea acknowledged there have been dangers of capital outflows when it delivered a historic half-point rate of interest enhance in a bid to rein in rising costs, as inflation soared to its quickest tempo in 24 years.

Considerations of capital outflows, or capital flight, are beginning to emerge as central banks globally race to boost rates of interest in an effort to curb rising inflation.

The disparity in charges between markets — particularly with some markets just like the U.S. favoring extra aggressive charge hikes — can begin to drive scorching cash flows as traders seek for higher returns.

Incidents of capital flight previously embody actions of cash reacting to U.S. quantitative easing measures after the sub-prime disaster, which included elevated liquidity and decrease rates of interest.

The weakening of the U.S. greenback pressured capital into different markets resembling rising economies in Asia, elevating inflationary pressures and appreciating the currencies in these markets.

Sizzling cash outflows in Asia?

Economists have began to warn about this spherical of scorching cash flows.

Mizuho Financial institution analysts stated in a observe final week there have been considerations of capital outflows from India, notably because the U.S. is actively elevating rates of interest and weaknesses are showing in India’s financial system.

India posted a document $25.6 billion commerce deficit in June, as crude oil and coal imports surged.

“It will exacerbate unstable capital outflows, at a time when the US Fed is already dedicated to aggressive charge hikes, implying higher INR depreciation pressures,” stated analysts Vishnu Varathan, Lavanya Venkateswaran and Tan Boon Heng.

Inventory picks and investing tendencies from CNBC Professional:

“The Reserve Financial institution of India, conscious about this predicament, is bracing for additional charge hikes.”

Thailand too might take into account extra charge hikes to maintain up with Fed charge rises amid a depreciating Thai baht which “threatened to worsen imported inflation and exacerbate capital outflows in an opposed suggestions loop”, the analysts stated.

The Chinese language financial system might additionally expertise elevated pressures in capital outflows because of U.S. charge hikes though China’s personal muted financial system was the extra seemingly driver for cash flows, stated Larry Hu, Macquarie Group’s chief China economist, stated in a observe final month.

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Finance

How to have ‘the talk’ with aging parents about money

Published

57 minutes ago

January 5, 2025

Press Room

How to have ‘the talk’ with aging parents about money

Listen and subscribe to Decoding Retirement on Apple Podcasts, Spotify, or wherever you find your favorite podcasts.

Talking about money with one’s parents isn’t usually an appealing encounter — but as more millennials and Gen Zers find themselves with aging parents, these discussions are becoming increasingly important.

“The talk” about an aging parent’s finances and end-of-life plans can be the key to ensuring long-term generational wealth — especially since most wealth doesn’t last longer than three generations, according to Dr. Lazetta Braxton, founder of Lazetta & Associates and the Real Wealth Coterie.

“When you don’t have the benefit of having substantial wealth that is taking care of multiple generations … you have to disclose about where everybody is, because if you don’t know, then the risk of the unknown can be catastrophic,” Braxton explained on Yahoo Finance’s Decoding Retirement podcast (see video above or listen below).

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Financial discussions have long been considered taboo, especially for older generations. That’s why younger generations often find themselves responsible for initiating these sensitive conversations.

Instead of approaching “the talk” as one tell-all discussion, Braxton encouraged people to think about it as a “series of conversations.”

“It’s not interrogating a parent,” Braxton said. “It’s giving them the opportunity to be proud of what they’ve done, even if they haven’t done all the things they really had desired to along the way.”

Sara Stein and Lee Stein, left, talk with Bob Millhauser as they wait for Abby Millhauser to join them for dinner in the Millhausers’ 940 sq. ft. accessory dwelling unit on April 19, 2024, in Raleigh, North Carolina. (Robert Willett/The News & Observer/Tribune News Service via Getty Images) · Raleigh News & Observer via Getty Images

For starters, she recommended that younger generations consider how uplifting the environment is before initiating a conversation with their parents.

Often, details about an elder’s power of attorney for healthcare and assets aren’t discussed until a major life event or crisis occurs, which can make financial discussions strenuous.

Instead, it’s best to start these conversations with lower stakes, Braxton said. She warned that approaching the discussion during a high-stress time “could reset the conversation for decades.”

It also may be helpful to have a third party, such as a financial planner, present when discussing more gritty details, as they can provide the facts and act as a neutral player in the conversation, Braxton said. Having a professional be a part of some of these conversations can also help define and outline some of the more confusing terms a person may not know going into the conversation.

“It’s so important in terms of building relationships … [to] know the trigger points and the glimmer points,” Braxton explained. “The trigger points … [shut] a family member down and the glimmer points … [give] them comfort and trust to say it is safe to talk about these conversations.”

Finance

Role of capital markets for raising green and transition finance

Published

9 hours ago

January 5, 2025

Press Room

Role of capital markets for raising green and transition finance

Jan 05, 2025 09:01 AM IST

This article is authored by Ajay Tyagi and Rachana Baid, ORF.

The climate crisis is a global commons problem requiring concerted actions by all. While recognising this, the United Nations Framework Convention on Climate Change has also acknowledged the principle of ‘common but differentiated responsibilities and respective capabilities,’ which assigns greater responsibilities to developed countries in mitigating greenhouse gas (GHG) emissions and reducing their carbon footprint. There have also been deliberations at successive meetings of the Conference of the Parties (COP) on developed countries providing financial and technical support to developing states. Despite commitments, however, developed countries have failed to transfer any significant amounts to the developing countries. Such delays have only worsened the situation, amid the increasing incidence and intensity of extreme weather conditions and natural calamities worldwide. Developing countries are more vulnerable to the massive consequences of these events and face an uphill task in arranging funding to finance their climate mitigation and adaptation requirements.

Green finance(Pixabay)

India is a vast country with a 1.4-billion population, a per capita income of approximately $2,500 per annum, and significant income disparity. India is also among the countries most affected by extreme weather events. Although India’s per capita annual GHG emission in 2021 was only 1.6 carbon dioxide equivalent (CO2e) metric tons as compared to, say, the 13.8 CO2e metric tonnes of the United States (US), China’s 7.5 CO2e metric tonnes, and the global average of 4.3 CO2e metric tonnes, it was the third largest incremental annual emitter of GHG in the world that year.

India has outlined ambitious targets to contain climate change impacts and meet its nationally determined contributions under the Paris Climate Agreement. These targets should also help the country achieve the Sustainable Development Goals by 2030, besides fulfilling its net-zero GHG emissions commitment by 2070—even as it aspires to become a developed country by 2047. Given its geographical size, population and diversity, however, India faces unique obstacles to these targets. For instance, over 75% of its districts (home to 638 million people) are categorised as hotspots for extreme climate events.  The climate financing strategies have to be appropriately mainstreamed in the overall development model.

This paper can be accessed here.

This paper is authored by Ajay Tyagi and Rachana Baid, ORF.

Finance

I’m a financial planner — this is the one simple money habit you need to break in 2025

Published

19 hours ago

January 4, 2025

Press Room

I’m a financial planner — this is the one simple money habit you need to break in 2025

New year, new habits.

Shannon McLay, the CEO of financial planning service The Financial Gym, is shaeing the one spending habit that people should break in 2025.

Emphasizing “mindfulness,” the money guru says it’s time to delete easy payment apps off your smartphone, which allow you to make thoughtless purchases with just the click of a button.

“I always say we work really hard for every dollar that we make, so we need to make it hard to spend those dollars because it’s hard to get it in the bank,” she told TheStreet.

“But it’s so easy for us to spend money we spend on our phones. We spend it with credit cards on apps, and we don’t realize where it’s going.”

McLay says financial experts “hear all the time” that their clients have “no idea” where their money is going, with many saying they “make it and then it’s gone.”

She encourages people to be mindful of their money, even though it’s often anxiety-inducing.

“We see people who look to us very financially healthy and are feeling anxiety,” she said. “And when we feel anxiety about an area, we avoid it. We don’t want to dig into the thing that’s creating anxiety.”

As a result, people are “not going to look at” where their income is going.

One study last year found that 73% of Americans are stressed about their finances.

“So that’s one of the first steps we’ll say is being mindful of where your money is going and whether it’s tracking your expenses via an app or even just manually tracking it in the Notes app on your phone,” McLay advised.

“That process of paying attention where your money is going is really a good first step.”

Gen Z has also ushered in another financially savvy trends — “loud budgeting,” or being transparent about finances.

“They are saying there is no shame and guilt in their financial situation,” financial expert Julie O’Brien, the senior vice president and head of behavioral science at U.S. Bank, previously told Money.

“They are just saying, out loud, that healthy management of their money is something they value more than consumption and the curated, unrealistic ideals they see portrayed.”