Hong Kong and China are most at risk of suffering a financial crisis, according to an indicator devised by investment bank Nomura Holdings Inc., reports Bloomberg.
Singapore-based analyst Rob Subbarama and fellow analyst Michael Loo developed an early warning system using data going back to the early 1990s.
The system includes five indicators that flash a signal of a financial crisis happening in the next 12 quarters when they breach set thresholds: corporate and household credit to GDP; corporate and household debt-service ratio; real effective exchange rate; real -- or adjusted for inflation -- property prices; and real equity prices.
Hong Kong has the most signals, 52 -- higher than during the 1997 Asian financial crisis. China’s total fell to 40 from 41 in the previous update that covered the period up to the fourth quarter of 2016.
The findings also show that emerging markets are more prone than developed markets, and that Asia ex-Japan is the region that is most at risk.