Big Asia Money See “Sucker Rally” In Region

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Asian markets are way up since March. Investors hope that the region has dodged the bullet of a slowdown in the West. A sharp recession in America could cause a drop in demand for goods and services from countries like China. Money managers in the Asia region think the moves up in the indices are premature.

One of the major causes for concern in the East is inflation. Reuters reports that "Rising prices could force Asian central banks to take tough action such as raising interest rates."

Can the US markets dodge a sharp sell-off in Asia? Probably not. If economies in the East begin to falter, it will mean that the large developed countries are in deep recessions and have cut imports. That cannot possibly benefit China, and it cannot benefit US investors.

Also, inflation in Asia in not likely to be contained in Asia, although it could be worse there. Business school professors may big money giving talks about the new "global" economy. In the case of rising food, commodities, and oil prices, the theory actually works.

A sucker rally in Asia probably mean a sucker rally in the US.

Douglas A. McIntyre