Vast foreign reserves built up by emerging export countries are vanishing faster than they came as governments fight to defend currencies and economies, disappointing foreign investors who saw them as shock absorbers to the global economy.

In the years of good global growth, Asian manufacturing economies as well as resource producers such as the Gulf states and Russia saw reserves grow drastically.

Some analysts had hoped that would help compensate for the massive deleveraging and capital flight that has hit emerging markets in particular as the global financial crisis intensified after September.

That has seen emerging stock markets lose close on 60 per cent of their value this year and emerging currencies come under increasing pressure and export revenues from manufacturing or resources dry up.
  
South Korea said on Wednesday its foreign exchange reserves -- which were the world's sixth largest at the end of October -- had dropped to their lowest level in four years. One government adviser said it was pointless squandering the rest of the country's reserves trying to lift the won currency, which has lost nearly 40 per cent against the dollar this year.

Russian foreign reserves have fallen by around a quarter from their peak of $600 billion in early August to around $450 billion now, with attempts to prop up the rouble again accounting for the lion's share of the fall.

Russia has since widened the band within which it allows the rouble to trade against a basket of currencies, effectively allowing gradual depreciation.

'The global economy is rebalancing and the buildup of forex reserves we saw in the last two years has been reversed,' said Lars Christensen, chief analyst and head of emerging markets at Danske Bank in Copenhagen.

'It is hard to see how it can be (changed) as long as investors keep pulling out of the emerging asset class.'

Korea saw its exports fall by more than 18 per cent last month, their biggest drop in seven years, while oil exporters such as Russia have seen crude prices plummet from close on $150 a barrel earlier in the year to under $50 now.

Chinese prudence?    

Overall, Asian foreign reserves excluding China's shrank by $119 billion in October to $2.34 trillion, central-bank data showed. But bucking the trend appears to be China, with $1.9 trillion in its reserves, making them the largest in the world having increased by an average $41.9 billion a month in the first three quarters of the year.

China says its reserves are continuing to rise, with the chief economist at the National Bureau of Statistics telling Reuters they would exceed $2 trillion by the end of the year. It releases data quarterly, not monthly.

In mid-November, the deputy governor of the People's Bank of China said Beijing would not resort to 'panic selling' of reserves, instead maintaining a 'prudent and responsible' stance.

At the end of September, India's reserves stood at $286.3 billion, down from $295.3 billion the previous month.
   
Korea's foreign reserves dropped $11.7 billion to $200.5 billion last month -- a fall of around 5 per cent that itself followed a record $27.4 billion decline in October. Worries reserves might dip below $200 billion have themselves put greater pressure on the currency, with the government openly admitting it could not stem the fall.
  
'South Korea does not have enough capacity for massive forex intervention,' senior presidential economic secretary Bahk Byoung-won told reporters, saying that instead Korea would carry out 'smoothing operations' in foreign exchange markets. Russia also had little choice, analysts say.

Unsustainable support    

'In this environment, currency 'devaluation' should be<