"Link above to today's FT. Interesting point here about the volume of credit. I know from the excellent audios that you are on the lookout for further price easing in Asian credit markets, but the trend noted below will have a contractionary and offsetting effect if it persists. It reminds me of the volume contraction in business credit in Australia in 1992/3, 18 months after the peak of credit losses, as the banks nearly stopped lending except to multinationals...

"Local banks are also seeing their cost of funds rise amid concerns about their asset quality, according to JPMorgan, forcing them to restrict credit: "Emerging market banks are tightening terms and standards across all regions and for all loan categories.""

Eoin Treacy's view Thank you for the link to this article which echoes a point made by Gerard Minack of Morgan Stanley in a report posted in Comment of the Day on November 4th. In the event of a major credit contraction there is the risk that Asian finances will be affected. So just how likely is such a scenario?

Europe remains the focus of investor angst. Italian yields at levels which triggered bailouts for Ireland and Portugal have been enough to initiate profit taking across a range of markets. Regardless of how the Italian situation plays out, the European banking sector is going to need additional capital. The EFSF will supply some individual governments may have to provide the rest. This is a widely accepted fact and is probably already in the price of the Eurozone's banking sector.

In the event that European banks are compelled to shrink the size of their respective loan books, it could have a short-term impact on Asian stock markets. However, regional governments are among the best placed to ease monetary policy and support their respective economies. High growth and low overall leverage are powerful attributes when faced with challenges unrelated to domestic affairs.