Stay away!

The United States economic recession is both epidemic and contagious.

The Asian Development Bank warned that prolonged volatility in global financial markets could lead to a reversal of capital flows to emerging East Asian countries.

"Though the region is resilient in previous periods of financial turbulence, several risks remain," the ADB said in the November issue of Asia Bond Monitor. Along with the limited exposure to U.S. subprime mortgages, wider ramifications could not be ruled out in the future. Subprime mortgages refer to housing credit given to borrowers with imperfect credit history and little equity. Rising subprime delinquencies in the U.S. have spooked financial markets as big banks took bad hits from exposure to financial instruments with subprime credit as underlying asset.In turn, it has caused sporadic investor aversion to assets from emerging markets.

Uncertainty regarding the losses from U.S. subprime delinquencies- together with an onset of high volatility in markets could also result in yen buy backs and could also set off an unwinding of the yen "carry trade." The yen "carry trade" refers to the borrowing of funds from the low-interest Japan and investing the proceeds in higher yielding assets. The Philippines, which has lured in $3.7 billion worth of hot money or investments in local stocks and bonds from January to October this year from only $1.97 billion a year ago, is among the beneficiaries of this carry trade phenomenon.

Also, credit and debt creation in U.S. seemed to have no limits. Consumers stopped saving and went on a borrowing and spending spree. They borrowed to consume and invest. Savings shrank to zero and mortgage debt rose.

All these inevitable conditions have the great potential to disrupt local currency bond markets and market liquidity more generally.

They will slowly but surely weaken the stamina of our shrinking economy.The U.S. recession syndrome will infect our country's immune system.