This time is different?

Bloomberg came up with a very relevant article on why where we stand is different from the Asian Financial Crisis of 1997.

In a nutshell, here is the gist of it:

What is happening?

The recent devaluation of the RMB and a strengthening USD, in anticipation of a rate hike (that didn't happen) has resulted in SE Asian currencies such as the Indonesia rupiah, Malaysia Ringgit, and Vietnamese Dong tumbling to levels seen during the 1997 Asian Financial Crisis.

How is this time different?

• These countries have lower external debt burdens.
• Exchange rates are now flexible; they were fixed and indefensible in 1997.
• They have more dry powder this time - higher foreign currency reserves - to shore up their currencies if required. In Indonesia and Thailand, for instance, there is room for further rate cuts, while Jakarta and Bangkok have announced higher domestic spending to boost their economies. Meanwhile, Kuala Lumpur has also announced a higher spending plan.
• Current account surpluses for these countries - exports are greater than imports.
• Asian banks are stronger - higher quality loan portfolios and regulations

In light of the above factors, analysts say that the drop in currencies is actually a healthy realignment that would help boost exports amidst a commodity slump. However, I'd like to add that there are now new factors in the equation:

What's new this time?

• It is a matter of time before the US starts raising rates, thereby exacerbating the outflows from emerging markets in search of safer havens and higher returns. 
• The slump in commodity prices have added on to the woes of Indonesia (coal) and Malaysia (oil).
• Loss of confidence in the Indonesian and Malaysian governments could lead to further political turmoil.
• China's slowdown, exporting deflation with it. 

All this volatility in the markets is not helping confidence, which is a prerequisite to boosting much needed investment and consumption. Surprisingly, 7 years from the crisis, we are still hearing about massive job cuts (read Deutsche, HP, Standard Chartered) with the only bright spot coming from Silicon Valley, widely touted to be approaching bubble territory. 

All eyes will be on the US and Chinese governments if they can bring their economies out of the deep end. It would also be crucial these new factors do not throw their economies out of balance; because this time it may be different ... a different crisis.