Markets: investors told to focus on threat from Asia.

• Author: Marshall, Jeffrey
• Position: Brief Article

Stock markets are overreacting to the worldwide economic slowdown and should be more concerned about mounting financial risks in Asia, according to an analysis released by The Conference Board.

While the U.S. and other economies are heading for a slowdown, a recession is not in the cards. "Far more worrying are financial risks that are growing outside the U.S. and outside traditional equity and bond markets--especially in Asia," warns Gail D. Fosler, executive vice president and chief economist of The Conference Board.

In the early 1990s, investment in Asia exploded and total investment rose to match the level of savings. But after the Asian financial crisis, investment fell back to 29 percent of gross domestic product (GDP) and has risen since then--but savings have risen faster, making Asia once again a major lender. Says Fosler: "These imbalances are made worse when there are huge inflows of foreign capital to private markets. Many of these countries have high savings rates because they...