Analysts say Asia is not sliding into another 1997

Nicholas Spiro, a partner at the advisory firm Lauressa Advisory, has been reading the same worrying signs as everyone else: rising yields on US government bonds, a weak yen, and technology shares that look expensive. A "yield" is the interest the US government pays to borrow, and when it goes up, global investors can earn more in a very safe place, so money tends to leave emerging markets like Indonesia. Writing in the South China Morning Post, he argues these strains are real but are not the ones that broke Asia in 1997.

His reason is that the machinery has changed. In 1997 the countries that got hurt worst, Indonesia among them along with Thailand, Malaysia and South Korea, tied their currencies to the dollar at a fixed price, a "peg". A peg feels safe, so companies borrowed cheap dollars without protecting themselves against a fall. When governments ran out of the reserves needed to defend the fixed price, the currency dropped all at once and those dollar debts became impossible overnight. Indonesia ended up with Suharto signing an IMF rescue in January 1998 that came with deep cuts and forced reforms. Since then the peg is gone, the rupiah moves with the market, central banks act sooner, and banks and big firms carry less of that hidden dollar risk. A report HSBC published on 31 August, titled "Nope, it's not 1997," reaches the same conclusion: the differences outweigh the similarities.

That is not a promise of calm. A floating currency means the pressure arrives slowly, as a weaker rupiah and higher prices for imported goods, instead of in one violent week.

Why it matters

If you have been thinking about moving savings into dollars because a crash feels close, this is the outside view telling you the 1998-style break is the wrong thing to prepare for. The realistic risk is the grinding kind: import prices, fuel, and anything priced in dollars getting steadily more expensive while wages stay flat. Watch US bond yields rather than daily rupiah headlines, because that is the number these analysts say actually pulls money out of Jakarta.