Asia's growth prospects have attracted global interest and a surge of capital inflows. Asia is now the second highest contributor to global trade, and is expected to overtake Europe in a few years. China, India and Indonesia are growing rapidly, registering GDP growths more than four times that of US and Europe. The prospect of greater Asian currency appreciation has drawn greater fund flows into the region. In 2010, inflows into Asian local bond markets reached record levels.
However, Heng said that investing in Asia was not without risks.
"The huge capital inflows, if left unchecked, have the potential to increase inflationary pressures and fuel asset-price bubbles. In an informal survey by MAS of 30 major fund managers, almost half cited the possibility of a hard landing of major emerging economies in Asia as a key risk."
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