HSBC's chief economist pointed out that rising US bond yields, a weakening yen, and the AI boom are similar to the period before the 2540 Asian financial crisis, but emphasized that Asia is stronger today than before, with the main risk lying in its dependence on US demand for AI.
On September 1, 2026, at 5:00 PM, CNBC reported that the current Asian financial environment shares many similarities with the period before the 1997 Asian financial crisis, including soaring US bond yields, a weakening yen, and heightened confidence in technology stocks. However, HSBC believes that the differences between the two periods outweigh the similarities, and that Asia today has stronger financial resilience than it did nearly 30 years ago.
Frederic Neumann, chief economist at HSBC, stated in an analysis dated August 31 that a key factor similar to the period before the 1997 crisis is the rise in U.S. government bond yields. Historically, the 10-year U.S. bond yield rose from approximately 5% in October 1993 to around 8% in November 1994, and even in April 1997, it remained at around 7%, about 2 percentage points higher than the level four years earlier.
The current situation is similar, with the 10-year US Treasury yield rising from a low of around 0.5% in August 2563 to around 4.79% on Tuesday morning. Year-to-date, the yield has increased by approximately 0.80 percentage points from 3.9% in February.
The U.S. Treasury Department also announced in August that it would increase the size of its repurchase agreement program, focusing on 10-30 year bonds, and would at least double the maximum repurchase limit from $2 billion to at least $4 billion.
Another factor that HSBC sees as similar to the period before the 2540 crisis is the weakening of the yen. In April 2538, the yen strengthened to around 80 yen per dollar before weakening to 130 yen per dollar in April 2540, a depreciation of approximately 55%.
Currently, the yen has depreciated by approximately 57%, from around 103 yen per dollar in January 2564 to 163 yen per dollar in July, before a rare joint market intervention between the US and Japan helped the yen partially strengthen. It is currently trading around 160 yen per dollar, and the market is watching for the possibility of further intervention.
Furthermore, the wave of confidence in technology shows another similar pattern. Before the 2540 crisis, investors were excited about the emergence of the internet, while currently, the trend of artificial intelligence (AI) is creating high expectations and driving significant investment in the technology market.
While many factors are reminiscent of the period before the Asian financial crisis, Neumann argues that the difference between 2540 and 2569 is more significant, particularly the capital structure of Asian countries. During the 2530s, most Asian economies were capital importers, meaning they received more foreign investment than they exported, and had insufficient domestic savings to meet their needs, leading to a high level of dependence on foreign funding.
This situation led to higher costs for dollar-denominated capital, along with volatility in the yen, becoming significant factors putting pressure on the region's financial system. Ultimately, the 2540 crisis resulted in sharp currency depreciation, capital outflows, banking sector problems, and economic recessions in many countries.
However, many Asian countries have now become exporters of capital, meaning that higher dollar costs and a weaker yen are not as volatile as they were in the 2530s.
However, HSBC warns that Asia is not safe from all risks; rather, the vulnerabilities have shifted from financial vulnerabilities to demand vulnerabilities.
A key factor is that many Asian economies are relying on the growth of the US AI hardware market, which is a major driver of electronics exports from the region, particularly from South Korea, Japan, Taiwan, and Singapore.
The strong influx of AI investment in the United States is boosting electronics exports and economic growth in these countries, but on the other hand, it makes Asia more sensitive to changes in US demand.
Neumann warned that if rising U.S. bond yields and financing costs begin to impact investment in AI hardware, or if yen volatility disrupts global financial markets, demand for electronics from Asia could decline rapidly, slowing the region's growth.
Therefore, although the current environment shares many elements with the period before the 2540 Asian financial crisis, HSBC does not see Asia heading towards a repeat of that crisis, as the region's capital position has become significantly stronger. The key point to watch this time, therefore, is not just the risk of capital outflow, but the risk that the slowdown in AI adoption in the United States could spill over into Asia's export sector and growth.
Reference: cnbc.com
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