C&W's Megan Walters, chief economist Asia Pacific, whocompiled the report, compares the current economic condition inAsia to the 1997 downturn. A little more than 10 years ago, therecession started with a banking crisis in the US, which spread toEurope and then Asia. According to the report, "Bank lendingagainst real estate assets led to a boom in asset prices followedby a sharp bustas real estate prices crashed."

After this crisis hit, it took some areas of Asia years torecover. Total returns in Tokyo remained in the negative through2002. However most areas felt the aftereffects for just a coupleyears after the 1997 crisis, Singapore, and Seoul all experiencedthe downturn in 1998, while Shanghai and Beijing felt the effectsin 1999. Tokyo and Hong Kong ended up feeling the effectslonger.

While not every crisis is the same, over the years each bankingcrisis tends to have similar characteristics. "As a banking crisisstarts, banks contract their balance sheets and become less willingto lend, which leads to a fall in asset prices. The combination offalling asset prices and a lack of credit from banks to companiesand consumers, trims their willingness and ability to spend,thereby cutting demand," according to the report. "A downwardspiral can ensue with concerns leading to a cut in spending; thenet result is the loss in aggregate demand leading directly to aloss of output."