"The US has already entered into a recession and we are now looking at global recession," Peters told FinanceAsia while on a brief visit to Hong Kong last week.
Peters says because of the inter-connectivity of the global economies, export-driven Asian economies may not be able to avoid the dreaded ôRö word this time. And he may well be right as last week both New Zealand and Singapore said they are in a technical recession, usually defined as two continuous quarters of negative growth.
A recent report by Morgan Stanley looking at the impact of the credit squeeze on Asia showed that the long duration of the credit crunch is beginning to take its toll on the regional economies.
Last week, Morgan Stanley downgraded its global GDP forecast for 2009 to 2.7% from 3.4% and its forecast for China's GDP to 8.2% from 9% previously. The current freeze in global lending markets opens up far more severe downside scenarios for the Asian economies, earnings and defaults than captured either by the forecast above or even by a normal recession, the report says.
Peters says the sharp downward spiral in the global equity markets can only be halted if the central banks and regulators in the US, Europe and Asia are more specific and detailed about their rescue plans.
"Clear signals [from the regulators] would help the market. There's a lot hanging on the proper execution [of the rescue package]," he says.
Peters is optimistic, however, that the rescue packages announced by the US Treasury, the Fed, Bank of England, the European Central Bank and other central banks in Asia last week were ôtremendously positiveö developments and should go a long way in helping the credit crunch that has snared the global money markets.
ôWe are on road to a better place. The world is not ending,ö says Peters, who terms the global equity markets slide as a panic reaction.
Last week a slew of central banks in Asia, the US and Europe, cut interest rates to boost liquidity in the banking system and shore up confidence in the equity markets.
Among other rescue packages announced, the British government offered Britain's eight leading banks, including Royal Bank of Scotland, Barclays and HSBC Holdings, a total of as much as ú50 billion, or about $87 billion, to shore up their capital in exchange for preferred shares to the government. The British government will also provide a guarantee of about ú250 billion to help banks refinance debt. In separate actions, Spain, France and Italy also said they would take steps to avoid the collapse of their own banks, including the possibility of acquiring government stakes as well.
"There has been a tremendous amount of positive developments in the past 10 days," Peters says and added that it would take some time for these measures to percolate down to action.
Last week, in a report on Asia-Pacific sovereigns, ratings agency Standard & PoorÆs said that risks and uncertainties loom for the region.
"Barely more than 10 years on from 1997, Asia-Pacific is being buffeted by the shockwaves of yet another major dislocation in global markets. This time, however, the epicentre is much further away and Asia-Pacific sovereigns are in much better shape to withstand the impact," says Standard & Poor's sovereign analyst Kim Eng Tan.
"Asia-Pacific is not, however, entirely insulated from developments in advanced financial markets and the relative respite this region is enjoying currently is likely to be temporary," says Tan. "The heat from the global financial crisis will be felt much more keenly if the dislocation does not abate soon."
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