Inspired by the International Business Conference last friday where speakers like the honourable Stockwell Day spoke about everything from the politics to the economies of emerging economies, I found this article from the Economist illustrating some interesting phenomenon about Emerging Markets and asks the question – how at risk are emerging economies from overheating?

This interactive spread tells many stories about the the countries illustrated.

Hong Kong in Focus

Why is Hong Kong in the chart?

Hong Kong is interesting because by most measures, it’s not an emerging economy. However, it’s as ‘hot’ as Brazil because of inflation and the shackles the Hong Kong Monetary Authority (HKMA) is in if they wanted to change that.

The Hong Kong dollar is pegged to the USD at between 7.75-7.85 HK/USD. The HKMA interferes in the currency markets to reinforce that range. But such a peg carries over into interest rate policy. To avoid arbitragers pushing up the HKD, the HKMA cannot raise interest rates to quell inflation pressures – despite strong economic growth, resulting in rapid credit growth and high inflation, especially in the housing sector as money from mainland China pours in.

However, the IMF predicts that HK inflation will peak this year and slow to 4-5% in 2012.

http://www.bloomberg.com/news/2011-11-22/hong-kong-s-inflation-rises-a-more-than-expected-5-8-1-.html

http://www.chinadaily.com.cn/hkedition/2011-11/23/content_14144862.htm

http://www.economist.com/node/21522520