May 25, 2011 2:41 PM EDT
Southeast Asia is rapidly becoming one of the world’s most powerful economic juggernauts, driven by fast growth and effective monetary policies by local central banks.
International Business Times spoke to Rob Lutts, President and Chief Investment Officer of Cabot Money Management in Salem, Mass., about two of the region’s most important economies, Singapore and Malaysia.
An expert on global emerging markets, Lutts currently oversees more than $500 million in assets under management for Cabot’s clients. He has just returned from a ten-day trip to the area.
IBTIMES: Singapore has the fastest-growing economy in Southeast Asia and they recently raised their GDP forecast for 2011. What is behind their superb growth? Singapore is basically a financial hub, right? Or do they have a diverse economy?
LUTTS: Singapore’s economy is really driven mostly by world trading volume. Singapore is indeed a financial hub of Southeast Asia, so they have large presence in financial services and insurance and property management etc.
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There is also a large port and ship management and repair industry in the region.
Their economy can grow dramatically at times and contract as well very quickly – which is all related to financial markets and world trade.
The government leadership in Singapore is very savvy – they are really great business leaders and have driven the economy with their business-friendly policies.
IBTIMES: The Singapore central bank can now permit their currency [dollar] to keep appreciating in value. What impact will this have on their economy?
LUTTS: Three years ago when I visited Singapore, the ratio between the US Dollar and the Singapore dollar was 1.45; last year in May it was 1.35, this year it is 1.23.
So the Singapore dollar relative to US dollar is very strong.
This makes goods made is Singapore more expensive. This will provide a headwind eventually.
IBTIMES: Given its huge economic growth, is Singapore now facing the threat of inflation and a housing bubble? What can they do to avoid this?
LUTTS: Most of Southeast Asia is experiencing fairly high levels of inflation. Wages in China and many other regions have risen by 15 percent to 20 percent over the past year.
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