Asian 'wall of money' comes with risks, says Westpac's Rob Whitfield

All we know that a huge amount of money has been flown into the Australian market, particularly from Asian countries. They have been trying to buy the Australian assets to secure the resources and products from Australia for a long time.

According to the Australian Financial Review today, the most senior institutional banker in Australia, Westpac Banking Corp's Rob Whitfield, says a wall of money from Asia will drive equities and property prices even higher, while a lower Australian dollar and commodity prices will serve as a cushion during an inevitable market correction, but one that may still be some time away.

He said discussions last week with CEOs and CFOs from many multinationals based in Asia and Asian companies revealed broad-based demand for Australian equities, property and tourism, agriculture and healthcare assets from a range of Asian countries would continue.

"While demand is slowing for our commodities, the demand for buying Australian assets is not slowing at all, it is increasing," he said.

Mr Whitfield also cautioned that equity and property prices would ultimately fall, an inevitable result of economic cycles, although this could be muted given the Australian dollar was down, along with commodity prices.

"We are now seeing central banks (in US) make decisions much more based for what they need for their own economy rather than the co-ordinated global response we saw in the first few years post-GFC." Should the US Fed adopt this approach, this "may well mean they bring their tightening forward", he said. "That will have quite significant ramifications around the globe."

For Australia, dropping the word "patient" would probably boost the US dollar, pushing the Australian dollar down towards US70¢, a level where the RBA does not need to cut rates again after the almost-certain cut that will be made in April or May, he said.

Ref: http://www.afr.com/business/banking-and-finance/financial-services/asian-wall-of-money-comes-with-risks-says-westpacs-rob-whitfield-20150318-1m25xx