HSBC economist warns of similarities to 1997 Asian financial crisis

HSBC Chief Economist Frederick Neumann has noted striking similarities between the current Asian financial landscape and the period preceding the 1997 Asian financial crisis. Key indicators cited include rising US Treasury yields, a weakening Japanese yen, and intense optimism within the technology sector.

Specifically, US 10-year Treasury yields have risen from approximately 0.5% in 2020 to around 4.79%. This mirrors the upward trend seen in the mid-1990s. Additionally, the Japanese yen has experienced significant depreciation, moving from roughly 103 in 2021 to levels near 160 in 2024, similar to the decline seen leading up to 1997.

However, Neumann emphasizes that current conditions differ significantly from the 1990s. While many Asian economies were capital importers during the previous crisis, most are now capital exporters. Consequently, the primary risk has shifted from direct financial fragility to “demand fragility.” The region's growth is increasingly dependent on US investment in artificial intelligence hardware; if rising US funding costs dampen demand for this technology, it could pressure exports and economic growth in countries like South Korea, Japan, Taiwan, and Singapore.