________________________________________________________________________
Crash in Indonesia brings down Asian markets
Copyright ) 1998 Nando.net
Copyright ) 1998 Reuters
SINGAPORE (January 8, 1998 09:07 a.m. EST http://www.nando.net) -
Frantic selling shredded Indonesia's financial markets Thursday,
highlighting a sweeping lack of confidence in the country's economic
management and contributing to a sell-off on most other Asian markets.
The meltdown in Indonesia, which has heightened gloom across a region
once brimming with unbridled optimism, showed no sign of abating and
raised the specter of civil unrest in the mainly Moslem country, home to
200 million people.
Indonesian stocks crashed 18.5 percent in mid-afternoon and the rupiah
currency was quoted late Thursday at 10,000 to the dollar -- from 2,500
in mid-1997. Stocks partially recovered to close almost 12 percent down
at 347.11 points.
"There is a complete lack of confidence," said Tom Soulsby, the head of
research for ANZ Securities in Jakarta.
"I think there is going to be further weakness. There is no liquidity at
all in the foreign exchange market, there is no natural buying of
rupiah."
Indonesia's woes sparked jitters around the region, and analysts have
expressed concern about the prospect of a Jakarta debt moratorium.
Stocks in Hong Kong closed sharply lower, Singapore shares were battered
by the fallout in Jakarta and Manila stocks hit a four-year low on fears
of a possible recession in the Philippines.
Most regional currencies kept heading south against the dollar.
A contagious mix of sinking currencies, growing foreign debt and
collapsing financial systems has sickened Asian economies in the last
six months.
Indonesia's financial crisis gathered steam this week, stemming from
fears the government of aging President Suharto was incapable of dealing
with the situation.
Economists have blasted the Jakarta leadership for failing to announce
tough reform measures in the country's national budget handed down
Tuesday and for unveiling unrealistic economic forecasts.
The fall in the rupiah Thursday was sparked by comments by U.S. Deputy
Treasury Secretary Lawrence Summers that Indonesia needed to show its
commitment to reforms agreed with the International Monetary Fund (IMF)
under a multi-billion dollar bailout plan drawn up in October.
Japan's Ministry of Finance added its weight, saying it hoped Indonesia
would take steps in accordance would the IMF rescue deal.
The stock market plunged Thursday on various rumors -- the most
prevalent was that Suharto would not seek re-election in March
presidential polls. Brokers said there was little basis for such talk.
Earlier Thursday Asia won a boost from a stronger yen, but the lighter
mood was short-lived amid a seemingly endless crisis of confidence over
the future of the region's shell-shocked economies.
Some Asian currencies had earlier taken a breather from recent
staggering declines against the U.S. dollar, gaining from speculation
about possible U.S. intervention to support the sliding Japanese yen.
Speculation that Japan would take more steps to bolster its faltering
economy sparked a surge in share prices and a drop in the dollar, but
doubts persisted whether or when such hopes would be realized.
The Nikkei average rallied early on speculation of the added steps --
spurred in part by visits to Washington this week by top finance
diplomat Eisuke Sakakibara, Economic Planning Minister Koji Omi and
Deputy Chief Cabinet Secretary Fukushiro Nukaga. It fell back to close
down 0.06 percent at 15,019.18 points.
The dollar tumbled below 132 yen in morning trade on the rumors and on
jitters over possible joint market intervention by the U.S. and Japanese
central banks to halt the yen's slide, but bounced back to about 132.80
yen in the afternoon.
But all eyes were on Indonesia's hemorrhaging markets.
There were reports the IMF had written a "strongly worded" letter to
Jakarta in response to a budget widely condemned as insufficiently
austere.
Attention was increasingly focused on the political situation, with
fears tough IMF conditions have heightened the likelihood of social
unrest prior to the March presidential poll in which Suharto, 76, was
expected to run for a seventh five-year term.
The late weakness in the Japanese yen and the rupiah all but erased an
earlier rebound in the Taiwan dollar, sending the rate back below T$34
to near Wednesday's 10-year closing low. It closed at T$34.325.
Hong Kong stocks closed sharply lower Thursday, battered by worries
about regional economies and rising local interest rates. The Hang Seng
Index lost 2.98 percent to end at 9,254.53 after hitting an intra-day
low of 8,928.86.
Philippine stocks closed down 5.24 percent at 1,655.85 points and
Malaysian stocks ended down 2.66 percent to 507.16 points.
In South Korea, attention was focused on a key meeting with bankers in
New York later Thursday.
The won closed at 1,788, compared with Wednesday's 1,745 finish. But the
Seoul stock market bucked the trend, with the composite stock index
ending up 3.55 percent at 423.96 as a late spurt of foreign buying
buoyed overall sentiment.
By DEAN YATES, Reuters
This archive was generated by hypermail 2b30 : Fri Apr 13 2001 - 12:59:29 PDT