Asian Markets Mirror Pre-1997 Crisis, Says HSBC Economist

Frederick Neumann, chief economist at HSBC, argues that today’s Asian financial environment shows notable resemblances to the period preceding the 1997 crisis. He points to two primary factors: a rapid rise in U.S. Treasury yields and a pronounced weakening of the Japanese yen. Neumann notes that the 10-year Treasury yield has climbed from a pandemic low of roughly 0.5 % to about 4.79 % in early 2024, with an 80-basis-point jump since February of this year.

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The 1997 Asian financial crisis unfolded after years of currency depreciation, capital outflows, and banking failures across the region. Prior to the crisis, U.S. Treasury yields had risen sharply, and the yen had slipped from a strong level near 80 per dollar to around 130, a depreciation of roughly 55 %. Those dynamics contributed to heightened market stress that later erupted into a regional recession.

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• U.S. Treasury Yields: From a low of 0.5 % in mid-2020 to about 4.79 % in early 2024, representing an increase of nearly 430 basis points.

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• Japanese Yen: The yen fell about 57 % from its early-2021 low near 103 per dollar to a high of 163 in mid-2023, before a coordinated intervention by Washington and Tokyo brought it back to roughly 160 per dollar.

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Neumann emphasizes that these shifts echo the yield and currency environment of the mid-1990s, suggesting a comparable risk profile.

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The U.S. Treasury announced a plan to expand its Treasury-buyback program, at least doubling the maximum size from $2 billion to a minimum of $4 billion for the 10-year to 30-year segment. This move aims to support market liquidity amid rising yields.

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• “Granted, that took six years; but this year alone, the yield has jumped some 80bp since 3.9% in February,” — Frederick Neumann, to hsbc's chief

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These observations highlight a convergence of macro-financial factors that, in Neumann’s view, warrant close monitoring for potential stress in Asian markets.

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