In the case of the technology stock market boom, there was a surge in business investment in technology goods and services. In the subprime/structured finance boom, there was a surge in demand for housing as credit availability increased sharply. This surge in activity is important because it reinforces the notion that the innovation is indeed significant and that “this time is different.” Third, there is often a positive feedback mechanism that tends to reinforce the belief system that underpins the extreme valuations associated with the boom. Without this, the boom isn’t likely to persist for long or push valuations far above what is justified by the fundamentals. As a result, the asset price movements are unlikely to be big or broad enough to threaten financial and macroeconomic stability. During the technology stock boom there were a number of reinforcing mechanisms. One important reinforcing mechanism was the strong notion that those who got to the market with their new Internet innovations would achieve large first-mover advantages. This perception was due to the fact that successful Internet-based models could expect to achieve strong network effects, which created significant barriers to entry and the prospect of extraordinary profits. Amazon might be a good example of a company that (eventually) succeeded at this. In this environment, many firms – both well-established companies and start-ups – invested heavily in the new technology. The ensuing sharp rise in investment in technology equipment and software led in turn to rapid earnings growth, which helped (for a time) to sustain stratospheric valuations.
Before I conclude, let me again stress that the development of more inclusive financial sectors is an important objective, and as policymakers we need to pursue this without compromising on the prudential standards that sustain confidence in the financial system. Branchless banking has tremendous potential to increase the outreach of financial services provided the different players and regulators are able to work within common regulatory framework. And finally that we must adopt a collaborative stance in pursuing this important global agenda which can make a real difference for the millions of people that remain caught in poverty. 4  BIS Review 162/2009  On behalf of Bank Negara Malaysia I would also like to thank our principal facilitators for the workshop from the Consultative Group to Assist the Poor, the subject matter experts from World Bank, the representatives from Maxis Communications Malaysia and Global Exchange of Philippines, and the representative from Group Speciale Mobile Association who joins us from London. I also welcome the participation of the Alliance for Financial Inclusion in this Forum, and we look forward to working with all of you on developing more inclusive financial sectors in the Asian region. Finally, I would like to thank all the participants who have come in from all over Asia to support this Forum. I wish you a fruitful forum and hope that you will form valuable professional relationships during this event. BIS Review 162/2009  5