There’s a paradox in Asian markets, according to Rafael Nam of Reuters. Balance sheets of Asian companies look like they’re in good shape, yet the cost of insuring against debt defaults by these businesses is even higher than it was a decade ago, during the Asian crisis. That makes life harder for them, but it could create an opportunity for investors.
In this case, the only rational explanation seems to be that investors – who are ultimately the ones doing the insuring – simply prefer to keep their money in highly liquid securities denominated in dollars or euros. Yet to the extent that investors’ preferences for the United States and the euro zone come from habit rather than from economic fundamentals – and habit is undoubtedly a part of it – the opportunity in Asia is real. So, who will take advantage?
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