Although the market realizes that a further rise in the asset price would virtually compress yield, the market appears to be less concern about a bubble in asset prices. Therefore, there is a risk of a sharp correction which we all witnessed in the recent episode in the Thai stock market last week. 6. The second dimension of the great rotation is the global fund flow, which is one of the greatest challenges emerging markets are experiencing. The continued monetary easing in advanced economies, economic growth differential and protracted low interest rate environment are key factors pushing investors to search for yield; fund flows have therefore switched from advanced to emerging economies. 7. This second dimension of the great rotation is a concern to policymakers in the region and has called for wider public discussions among academics, businesses and policymakers. Discussion typically centred on the potential recourse to macroprudential or  BIS central bankers’ speeches  1  unconventional measures on the part of recipient countries, given that such practice has been adopted by the source countries of the fund flows. As market participants, we all recognize the benefits of capital inflows that provide a two way view for the market, thus adding depth and breadth to emerging financial markets. Therefore any considerations on the use of capital flows policies need to be carefully thought out with consideration of potential unintended consequences and impacts.
Needless to say, there is greater acceptance for these measures to be part of the toolkit of the authorities and central banks are continually monitoring the markets and ready to take actions in cooperation with regulators and market participants. 8. To respond to the surge in inflows, the BOT has chosen the route of capital account liberalization as the most natural counter to encourage the outward flows of capital. We believe that this measure will help lessen the pressure from the rotating fund flows as well as provide the opportunity for Thai enterprises to secure new markets in preparation for the ASEAN Economic Community (AEC). The roadmap includes relaxation in outward direct investment and portfolio investment. In addition, the BOT has allowed Thai corporates to issue foreign exchange denominated bonds domestically. There is no reason why a reputable Thai corporate should have to go oversea to secure funding if they are well known domestic household names that can mobilize funds at a more attractive rate domestically. Hence, the rotation in fund flow will be taken place at both ends; thereby balancing Out-In with In–Out flows. 9. Against the backdrop of a rotating world, the financial industry is confronted with tighter regulation. Since the collapse of Lehman Brothers in 2008 the world has been thrown in a global recession for half a decade.