Credit squeeze may hurt global economy-HKMA

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HONG KONG, Oct 4 (Reuters) The Hong Kong Monetary Authority said on Thursday it isn't clear when turmoil in global money markets will subside or whether monetary policy will be effective, raising the risk that credit tightness will hurt the global economy and asset prices.

HKMA Chief Executive Joseph Yam said Asian economies were not necessarily immune to current turbulence in the U.S. and European money markets, even though the impact had been muted so far.

''It is not clear when this turmoil in the money markets in the United States and Europe will subside or whether monetary policy shifts may help,'' he said in a weekly column on the HKMA's Website

''There is a risk that prolonged credit tightness may have adverse implications for the economy and asset prices in the developed markets, ultimately affecting the global economy,'' he said.

Global financial markets rallied early this week on hopes that the U.S. and European central banks have taken enough action to stave off the global credit crisis and former U.S.

Federal Reserve Chairman Alan Greenspan said the worst of the credit crunch was over.

Asia has been largely cushioned against the credit problems by local banks' large capital bases and because financial innovation through securitisation was less widespread than in developed markets, he said.


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