Inflation in Asia — a big wave following Europe and America

Most countries in the world are trying to curb rising inflation, the global average is now an alarming 7.4% - as is the case in Thailand

Inflation in Asia — a big wave following Europe and America

As the Asia Times notes, inflation in the U. S., the U. K. and Germany has risen to 40-year highs. The major economies of Latin America are suffering from inflation not seen in more than 15 years. Inflation in sub-Saharan Africa will be 12.2% this year. In the Netherlands, it tripled to 9.2% this year, and in Australia it doubled to 5.3%.

Asian countries have managed to remain relatively stable so far, but that has now changed. In Thailand, inflation jumped to 7.1% in May, instead of the 5.9% economists expected. This is the fastest increase since 2008. In Indonesia, consumer prices are rising at their fastest pace since 2017, and inflation in North Korea has been well above economists’ estimates every month since January. In India, inflation slowed slightly to 7.04% in May, yet for the fifth month in a row it remained well above the limit set by the country’s Reserve Bank. Experts warn that rising demand amid loosening coronavirus restrictions in China could lead to stronger consumer inflation by the end of the year.

Clearly, the region is seeing a worsening inflationary environment mainly due to disruptions in supply chains from China. This will likely lead even the most stubborn central banks to act by raising key rates. Malaysia’s central bank has already raised its key rate, and other countries, including India, the Philippines, Indonesia, and Thailand, are likely to follow in the coming months.

To maintain and grow their fortunes during the next inflationary round, investors should review their stock portfolios to make sure they are profitable in the new environment. In the current environment, it makes sense to look at sectors such as energy, commodities, pharmaceuticals and branded consumer goods. Investors should continue to invest in the market, ensuring diversification of their portfolios, which is key to addressing volatility.

It’s also worth reconsidering the ratio of stocks in portfolios, as bonds from countries that weren’t prepared for another round of monetary tightening by the Federal Reserve announced this week are likely to suffer losses.

«As the Fed is set to raise borrowing costs faster than expected, Asian countries are at greater risk of capital outflows and economic slowdowns than, for example, prudent Brazil,» the publication notes.

The situation is changing rapidly, and investors should not be overconfident and try to invest on their own to secure wealth.