3 ways Asian economies can prepare for a financial market downturn

Charging Bull - New York City
Charging Bull - New York City

Charging Bull, which is sometimes referred to as the Wall Street Bull or the Bowling Green Bull, is a bronze sculpture, originally guerilla art, by Arturo Di Modica that stands in Bowling Green Park in the Financial District in Manhattan, New York City. Description The 3,200-kilogram (7,100 lb) sculpture stands 11 feet (3.4 m) tall and measures 16 feet (4.9 m) long. The oversize sculpture depicts a bull, the symbol of aggressive financial optimism and prosperity, leaning back on its haunches and with its head lowered as if ready to charge. The sculpture is both a popular tourist destination which draws thousands of people a day, as well as "one of the most iconic images of New York" and a "Wall Street icon" symbolizing Wall Street and the Financial District. In Outdoor Monuments of Manhattan: A Historical Guide, Dianne Durante describes the sculpture: The Bull‍ '​s head is lowered, its nostrils flare, and its wickedly long, sharp horns are ready to gore; it's an angry, dangerous beast. The muscular body twists to one side, and the tail is curved like a lash: the Bull is also energetic and in motion. The bronze color and hard, metallic texture of the sculpture's surface emphasises the brute force of the creature. The work was designed and placed so that viewers could walk around it, which also suggests the creature's own movement is unrestricted — a point reinforced by the twisting posture of the bull's body, according to Durante. Charging Bull, then, shows an aggressive or even belligerent force on the move, but unpredictably, it's not far-fetched to say the theme is the energy, strength, and unpredictability of the stock market." Di Modica told the New York Daily News in 1998: That bull is one of an edition of five. … I'm hoping the other four will be going to cities all over the world, whenever somebody buys them. In 2010, a similar Charging Bull sculpted by Di Modica, which looks "younger" and "stronger", was installed in Shanghai, called Bund Bull, and in 2012 one was placed on Het Beursplein in Amsterdam. History Construction and installation Di Modica spent some $360,000 to create, cast, and install the sculpture following the 1987 stock market crash as a symbol of the "strength and power of the American people." The sculpture was the artist's idea, not the city's. In an act of "guerrilla art", he trucked it to Lower Manhattan and on December 15, 1989, installed it beneath a 60-foot Christmas tree in the middle of Broad Street in front of the New York Stock Exchange as a Christmas gift to the people of New York. That day, crowds came to look at the bull, with hundreds stopping to admire and analyze the gift as Di Modica handed out copies of a flier about his artwork. The police seized the sculpture and placed it into an impound lot. The ensuing public outcry led the New York City Department of Parks and Recreation to install it two blocks south of the Exchange in the plaza at Bowling Green with a ceremony on December 21, 1989. It faces up Broadway. Ownership In 2004, Di Modica announced that the bull sculpture was for sale, on condition the buyer does not move it from its present location. Di Modica continues to own the copyright to the statue. In 2006, Di Modica sued Wal-Mart and other companies for illegally benefiting from his copyright, by selling replicas of the bull and using it in advertising campaigns. In 2009, Di Modica sued Random House for using a photo of the bull on the cover of a book discussing the collapse of financial services firm Lehman Brothers.[10] Since New York City does not own the sculpture, it has a technically temporary permit allowing it to stand on city property, but the temporary permission has lasted since 1989, when city officials said the new location would not be permanent. Art on loan is usually limited to a year's display. Although the city does not buy art, it accepts donations. A writer in the New York Daily News wrote in 1998 that the statue's placement was "beginning to look a mite permanent". According to an article in Art Monthly, Di Modica, "the authorities, and New York public, view it as a permanent feature of Lower Manhattan. As soon as the sculpture was set up at Bowling Green, it became "an instant hit". One of the city's most photographed artworks, it has become a tourist destination in the Financial District. "[I]ts popularity is beyond doubt", a New York Times article said of the artwork. "Visitors constantly pose for pictures around it." Adrian Benepe, the New York City parks commissioner, said in 2004, "It's become one of the most visited, most photographed and perhaps most loved and recognized statues in the city of New York. I would say it's right up there with the Statue of Liberty."[1] In 1993, Arthur J. Piccolo, chairman of the Bowling Green Association, made the same point with the same comparison.[12] Henry J. Stern, the city parks commissioner when the statue first appeared in the Financial District, said in 1993: "People are crazy about the bull. It captured their imagination." The statue's popularity with tourists has a very international appeal. One 2007 newspaper report noted a "ceaseless stream" of visitors from India, the United Kingdom, South Africa, Venezuela and China, as well as the United States. Children enjoy climbing on the bull, which sits "famously" at street level on the cobblestones at the far northern tip of the small park. One popular tourist guidebook assumes that a visitor will want to get his or her picture taken with the statue "after you pose with the bull" A popular Bollywood movie, Kal Ho Naa Ho features the bull in a musical number, increasing its familiarity with Indians. One visitor told a newspaper reporter it was a reason for his visit. In addition to having their pictures taken at the front end of the bull, many tourists pose at the back of the bull, near the large testicles "for snapshots under an unmistakable symbol of its virility." According to a Washington Post article in 2002, "People on The Street say you've got to rub the nose, horns and testicles of the bull for good luck, tour guide Wayne McLeod would tell the group on the Baltimore bus, who would giddily oblige." According to a 2004 New York Times article, "Passers-by have rubbed — to a bright gleam — its nose, horns and a part of its anatomy that, as Mr. Benepe put it gingerly, 'separates the bull from the steer.'" A 2007 newspaper account agreed that a "peculiar ritual" of handling the "shining orbs" of the statue's scrotum seems to have developed into a tradition. One visitor, from Mississippi, told the Tribeca Trib she did it "for good luck", and because "there’s a kind of primal response when you see something like that. You just have to engage it." The enthusiastic reaction to the sculpture continues into the darker hours. "I’ve seen people do some crazy things to that bull," said a souvenir vendor, "At night sometimes, when people have been drinking, I’ve seen them do stuff to that bull that you couldn’t print in a newspaper." Following the 2011 Occupy Wall Street protests, the sculpture was placed under police guard and was generally off-limits to tourists for almost 3 years, but is now again openly accessible. In popular culture The sculpture is featured in the films For Richer or Poorer (1997), Hitch (2005), Inside Man (2006), The Other Guys (2010), The Sorcerer's Apprentice (2010), and Arthur (2011). It also appears in the TV series My Life as Liz and Weeds. A dancer posed in arabesque atop the sculpture in the 2011 Adbusters appeal to "Occupy Wall Street".


Asia’s financial markets are increasingly vulnerable to external shocks. Policy makers should stay vigilant.

Global financial markets are booming. Central banks in advanced economies are in tacit competition mode to extend their ultra-loose monetary policy as long as they possibly can. On the one hand, the global economy is enjoying a robust and synchronized recovery. On the other hand, however, central banks are maintaining an extremely cautious stance on acting on this and switching gears back to the normal policy level. This is partly due to a legacy effect. Zero or even negative interest rates, coupled with aggressive asset purchases by central banks, have been praised as a key factor in spurring the current economic recovery.

It seems that central banks don’t want to cause harm to such credit by hastily exiting credit and liquidity laxity. By announcing that it will continue to buy €30 billion ($34.8 billion) in bonds per month at least until September next year and keep interest rates low beyond then, the European Central Bank (ECB) placated market players’ concerns about an imminent end to loose monetary policy in the Euro area. Equity markets on both sides of the Atlantic have welcomed the move, which has further lowered German bund and UK guild yields. With Jerome Powell, nominee to become the new Chair of the US Federal Reserve, expected to support policy continuity, this may signal a yawning interest rate differential between the US and EU.

What does this have to do with Asia? Although the policy metrics of central banks in advanced economies may not include Asian economies, Asia is not immune from the impact of changing global monetary policy and financial market conditions. ADB’s recent Asian Economic Integration Report 2017 noted that inward debt investment to Asia fell by $13.9 billion in 2016, a reversal of the $28.8 billion increase in 2015. But inward equity investment climbed by $167.6 billion, much higher than $46.7 billion increase in 2015. Both the EU’s and US’ portfolio equity investments were robust. With debt investment to Asia also recovering in 2017, total financial flows into the region seem to be growing as strong as ever. This could be a good sign for regional economies, as it may reflect foreign investor confidence in Asia. However, an examination of global financial conditions calls for a more cautious interpretation. Financial inflows reflect a search by investors for yield, both for bond and equity. But more fundamentally, they are spurred by expanding global liquidity and credit cycle. The global economy is at the latter phase of that cycle, and there is a lack of sufficient investment opportunities worldwide. Look at US stock markets. The Dow Jones and S&P indexes are hitting historical highs almost every week, along with equally historically low market volatilities. There’s no doubt that a significant degree of investor complacency underlies this. If capital flows into Asia are driven more by the global liquidity cycle than by economic fundamentals, these flows can ebb at any time and at any speed. In this sense, the recent policy stance reaffirmed by the ECB is not encouraging for Asian economies and financial markets. The global liquidity cycle should be normalized and the credit binge reduced before asset price bubbles are created. Hence, Asia needs to stay vigilant so things do not get out of control. Unfortunately, Asian financial markets are becoming more and more susceptible to potential market corrections and capital flow reversals triggered by factors such as geopolitical risk or economic policy failures.

So, what steps could correct this trend? The crucial step is for Asian policy makers to start preparing. First, early detection and preemptive response to any buildup of financial risk is critically important. Policy makers can do this in three ways: 1. Maintain sound macroeconomic policies—including a flexible exchange rate and adequate foreign exchange reserves—to maintain investor confidence. 2. Adopt an effective macroprudential policy framework to prevent excessive credit growth and asset price inflation. 3. Enhance risk management systems by upgrading prudential regulation and supervision.

Second, in the medium to long term, deepening and broadening regional financial markets and financial systems are essential for financial efficiency and resilience. A more developed and regionally integrated banking and financial market can improve efficiency in channeling regional savings into real, productive investment.

Third, further reforms are needed to make economies more resilient, and ensure sustainable and inclusive growth. Crisis lessons remind us that sound economic fundamentals are the key to resilience. The region requires greater revenues from tax reforms and better collection to finance infrastructure and social sector needs. Fiscal policy can also play an important long-term role in enhancing an economy’s productivity and growth potential. The global economy is entering uncharted territory, with sustained economic growth coupled with low inflation and close to full employment. This emerging scenario puzzles economists as well as policy makers. In uncertain times, it’s best not to rely on probabilities. Instead, the region’s economies should check their fundamentals once again, and take precautionary measures against potential risks.

by Jong Woo Kang , Asian Development Bank This post was first published on the ADB blog.


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