From: Michael Wilson (MWILSON/0005514706at_private)
Date: Mon Jan 12 1998 - 08:08:35 PST

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    All the news that fits...  -MW
       Updated at 1.25am: Hong Kong stocks prices were decimated on Monday
       morning as the market reeled from the imminent collapse of investment
       bank Peregrine Investment Holdings, fears about the stability of the
       local currency and region-wide retreats in financial markets.
       The 33-member Hang Seng Index, the market's leading indicator, plunged
       985.51 points, or 11.08 per cent to end at the morning session at
       Nikko Securities senior investment adviser Kent Rossiter said: ''It's a
       triple whammy. You've got the [falls in the] States, Peregrine and
       higher interbank rates all at one.''
       Peregrine, Asia's biggest independent investment bank, is on the verge
       of collapse after a rescue bid led by Switzerland's Zurich Group failed
       last week. Peregrine faces millions of dollars of losses from
       investments across Asia - especially Indonesia - that have gone sour.
       Emergency talks over the weekend by Peregrine management failed to
       secure a fresh white-knight deal and Peregrine staffers said this
       morning that an announcement on closure was expected within hours.
       One Peregrine employee said: ''It's like the [film] Titanic, the stern
       is sticking up out of the water and we're going down.''
       He said that staff were removing personal effects from the offices,
       which were besieged by worried investors, in anticipation of the
       premises being sealed by liquidators.
       ''Everyone's knicking everything and going out the back stairs. It's
       pathetic. There's blind panic. It's a disaster. They've told us all the
       rescue bids have failed,'' the employee said.
       Brokers said that Peregrine's potential failure was hurting already
       fragile sentiment in the stock market, which has fallen for eight
       consecutive sessions.
       Fears over the continued stability of the peg, the 14-year-old tie that
       binds the local dollar to its US counterpart were also punishing share
       prices, brokers said.
       Interbank lending rates moved sharply higher, indicating that pressure
       was building on the link.
       Three-month money was quoted at 18.5 per cent compared with 15.5 per
       cent. The overnight rate was at 10/15 per cent compared with 7/9 per
       On Friday, banks raised their best lending rates by threequarters of
       apercentage point to 11.5 per cent.
       Mr Rossiter said: ''There are genuine fears [about the peg] but they are
       misplaced. I think it will hold. The pressure, though, has never been
       this bad. This is a true test of the Hong Kong Government.''
       Senior Government officials have repeatedly stated the administration's
       total commitment to the link, or currency board. It also enjoys the
       complete support of the Beijing government, which has said it is
       prepared to back it with China's vast foreign currency reserves if the
       need arises.
       On money markets the Hong Kong dollar was trading level at 7.74 to the
       US dollar.
       Brokers said Wall Street's 222.2 point slide on Friday was adding to the
       bearish mix.
       More declines on the Hong Kong market were predicted in the afternoon
       session, which begins at 2:30 pm Hong Kong time.
       Mainland-related shares were hit even harder than the blue-chip market,
       which is at its lowest level since March 1995.
       The official red-chip index shed 24.32 per cent to 934.78 points, while
       the Hang Seng China Enterprises slumped 17.8 per cent to 436.51 points.
       Stock prices were weaker in most Asian centres this morning, with the
       exception of Manila and Jakarta.
         Copyright ) 1998 South China Morning Post Publishers Ltd. All rights
       Monday January 12 1:10 AM PST 
       Updated at 4.15pm: Peregrine Investments Holdings was on Monday
       preparing an application for liquidation.
       The news came after Asia's largest independent investment bank laid off
       non-essential staff after telling personnel it could no longer ensure
       their pay.
       ''We have already defaulted in the US,'' said a senior company source
       ''My guess would be that they are going to have a board meeting and the
       next step in this scenario would be the appointment of a liquidator.
       ''They will make that decision in the meeting.''
       Director Peter Fu said the company would appoint a liquidator by 5pm.
       Another director said an announcement would be made later on Monday.
       ''There will be an announcement, probably this evening,'' director Alan
       Mercer said at the company's Central offices.
       Another Peregrine official said the firm was likely to be broken up and
       its best-performing businesses sold.
       Profitable units like Peregrine Securities and Peregrine Capital would
       probably be put up for sale, the official said.
       Monday January 12 1:10 AM PST 
       By From GREG TORODE in Jakarta
       Unprecedented diplomatic pressure will mount this week on Indonesia's
       troubled President Suharto as tensions rise over his leadership.
       Japanese Prime Minister Ryutaro Hashimoto and German Chancellor Dr
       Helmut Kohl were expected to phone Mr Suharto to urge him to institute
       urgent reforms for the sake of stability, diplomatic sources said.
       The calls follow a lead taken by US President Bill Clinton on Friday
       when he phoned Mr Suharto with a warning to stand by International
       Monetary Fund (IMF) rescue efforts.
       Australian Prime Minister John Howard called Mr Suharto yesterday.
       The Western push will be amplified today by the arrival in Jakarta of US
       Deputy Treasury Secretary Lawrence Summers.
       Mr Summers is expected to demand structural changes which could hurt
       lucrative monopolies operated by some of Mr Suharto's children.
       Also expected later in the week is US Defence Secretary William Cohen,
       who sought to calm fears of tensions degenerating into anarchy in
       "This is precisely the reason that the IMF and the US are seeking to
       provide confidence to each of the countries and to the people," Mr Cohen
       said on arrival in Kuala Lumpur.
       Mr Suharto spent the weekend in his house in suburban Jakarta surrounded
       by his family and closest advisers to prepare for what could be the
       toughest week of his 32-year rule.
       Popular pro-democracy leader Megawati Sukarnoputri raised the political
       tension across the capital on Saturday by declaring her nomination for
       the presidency in a speech that attacked Mr Suharto's regime as "greedy
       and corrupt" and dominated by "economic criminals".
       The city was calm last night but armed vehicles were seen cruising the
       inner city.
       The rupiah tumbled to 11,200 to the US dollar on Friday but recovered to
       just under 8,000 when markets closed for the weekend.
       Any further devaluation of the rupiah could add to pressures on
       Indonesia to declare a moratorium on US$133.3 billion (HK$1,032 billion)
       in private sector debt - most of it short-term and unhedged.
       Mr Suharto's senior economic ministers will continue talks with IMF
       deputy managing director Stanley Fischer today in preparation for the
       arrival of the fund's chief Michel Camdessus on Wednesday.
       Monday January 12, 6:01 am Eastern Time
    Japan funds gloomy on Japanese stocks - Merrill
       LONDON, Jan 12 (Reuters) - Japanese fund managers were taking an
       increasingly negative attitude towards Japanese shares, according to a
       Merrill Lynch survey released on Monday.
       Buyers of Japanese shares outnumber sellers by just seven percent, the
       lowest such figure since March 1997, and down from 24 percent a month
       The outlook for earnings is gloomy, according to the survey. Fund
       managers were forecasting fiscal year 1997 earnings growth of 2.8
       percent, down from about 10 percent in May.
       Although 60 percent of managers expect economic activity in Japan to
       improve over the coming year, expectations are modest, according to
       Merrill. Not one manager expected the economy to improve
       ``significantly,'' according to Merrill.
       Japanese fund managers were also bearish on the yen and continued to
       favour U.S. Treasuries. Only one in ten managers named the yen as their
       favourite currency for the coming year, while 69 percent chose the U.S.
       dollar as their favourite.
       And Japanese fund managers continue to sell Japanese bonds, with sellers
       outnumbering buyers by 19 percent, U.S. Treasuries continued to be
       popular, with buyers outnumbering sellers by 31 percent.
       The survey was conducted by Gallup on behalf of Merrill between January
       5 AND 6. It covered 42 institutions responsible for funds totalling $644
       Monday January 12, 5:59 am Eastern Time
    Japan banks problem loans assessed at $575 billion
       By Fumiko Fujisaki
       TOKYO, Jan 12 (Reuters) - Problem loans held by Japanese banks run to
       around 76 trillion yen ($575 billion) -- more than three times
       previously accepted estimates, the Ministry of Finance (MOF) said on
       The new total, which includes 65 trillion yen ($492 billion) in
       ``substandard loans,'' was calculated using a stricter appraisal method
       and comes as Japan's parliament begins a session expected to focus on
       measures to stabilise the nation's rickety financial system.
       The mountain of bad debt, much of it extended during the heady days of
       the bubble economy, is blamed for undermining confidence in Japan's
       banks and creating the current credit crunch.
       A ministry official said the new and more realistic picture of the
       country's bad loans mess was offered to help deepen public awareness of
       the severity of the situation.
       While the government has worked out a package of measures to stabilise
       the financial system, many analysts expect heated debate in parliament,
       particularly over provisions to use public money to shore up the system.
       Loans extended by 146 Japanese banks totalled 624.86 trillion yen ($4.73
       trillion), of which healthy loans stood at 548.16 trillion yen ($4.15
       trillion), the MOF said in a statement. The data was calculated under
       the new assessment method, known as ``prompt corrective action'' (PCA),
       by banks between March and September last year.
       The banks had 65.29 trillion yen ($494 billion) of ``class two'' loans,
       those where the creditworthiness of the borrower raises concern that
       recovery may be more difficult than on ordinary obligations.
       It also said ``class three'' bad loans totalled 8.72 trillion yen ($66.0
       billion) and ``class four'' bad loans totalled 2.69 trillion yen ($20.3
       Class three loans are those to firms with management difficulties but
       which are in no immediate danger of bankruptcy. Class four assets are
       considered impossible to recover.
       A MOF official said that while banks must keep loan-loss reserves
       against all four classes of loans, banks can exercise their own judgment
       under the lead of auditors in setting aside provisions for class two and
       three loans.
       ``As for class two loans, it is misleading if you say that they are all
       problem loans,'' the official said.
       Industry sources said banks generally set aside loan loss provisions of
       about 50 percent of the value of class three assets.
       Under the PCA system, which officially starts on April 1, financial
       institutions are required to make stricter risk assessments of each
       customer's financial situation based on advice from auditors. They must
       unload potentially risky loans.
       The PCA system is meant to serve as an early warning mechanism for
       financially troubled banks.
       Under a different calculation system by the Federation of Bankers'
       Associations of Japan, problem loans held by Japanese banks totalled
       21.7 trillion yen ($164 billion) at the end of last September.
       Analysts said the amount of problem loans unveiled on Monday was not
       surprising as there has already been increased market scrutiny of
       Japanese banks' bad loan mess.
       Some analysts said they now expected some big banks to unmask their bad
       loans on an individual basis in order to win back long-lost confidence.
       ``To ease unnecessary worries over their financial health and
       speculation, Japanese banks should voluntarily announce bad loans,''
       Yoshinobu Yamada, an analyst at Merrill Lynch Japan, said recently.
       He said without improved disclosure of bad loans, it would be difficult
       for Japanese banks to win confidence.
       Monday January 12, 2:08 am Eastern Time
    Japan PM says will not trigger global depression
       By Yoko Kobayashi
       TOKYO, Jan 12 (Reuters) - Japanese Prime Minister Ryutaro Hashimoto on
       Monday outlined to parliament his plans to head off what he said was any
       chance of his country triggering a global depression.
       Urged on by world leaders to use economic recovery in Japan to pull Asia
       out of its financial crisis, Hashimoto vowed to make Japan again ``the
       leader of a flock of flying geese.''
       ``It is my strong determination not to start a financial or economic
       depression from Japan, to stabilise the financial system, which is the
       main artery of the economy, and to restore confidence in the economic
       outlook,'' Hashimoto said in a speech to a new session of the Lower
       House of parliament.
       There were no new measures announced in the speech, which was more a
       clarion call to battle than a list of what needed to be done to revive
       the world's second-largest economy.
       Explaining his already announced decision to seek parliamentary approval
       for income tax cuts of two trillion yen ($15.1 billion) from February,
       Hashimoto said he acted after realising that Asia's economic plight was
       worse than he had thought.
       ``I took into account the history and the reality of Asia's economic
       growth -- where Japan acted as the leader of a flock of flying geese --
       and the need to achieve a strong Japanese economic recovery,'' Hashimoto
       The prime minister said Japan would stick to its plans for fiscal reform
       but it needed to be flexible in adapting to financial conditions and
       global economic conditions.
       U.S., European and Asian leaders have urged Japan to loosen its purse
       strings to get domestic consumption back on track.
       ``I will never associate myself with that pessimistic view which makes
       it sound as though there is no future for the Japanese economy,'' he
       Japan hopes to spur corporate activity by making some 840 billion yen
       ($6.36 billion) worth of cuts in corporate, securities transaction and
       land holding taxes, as well as taking financial stability steps, he
       He said further structural reforms are needed for Japan to let domestic
       demand lead its economic growth.
       Japan will also include in its extra budget for this fiscal year about
       one trillion yen ($7.5 billion) of public works projects for rebuilding
       after disasters and about 1.5 trillion yen ($11.3 billion) of
       front-loading of some public projects planned for next fiscal year.
       Up to 30 trillion yen ($227 billion) of public funds will be made
       available for the protection of all deposits, and legal steps would be
       considered for the protection of securities investors and insurance
       policy holders, Hashimoto said.
       The public funds will be used to strengthen and expand the present
       deposit insurance system as well as to purchase banks' preferred shares
       to boost their capital, he said.
       The government will also ease a credit crunch by making more loans
       available from state-affiliated banks and to introduce flexibility on
       the capital adequacy ratio for banks operating domestically, he said.
       ``These measures were taken with the utmost consideration for the
       economy. I believe these measures, together with the financial
       stabilisation steps, will bring about strong recovery for our economy,''
       Hashimoto said.
       ``I will strongly urge Japanese financial institutions to improve their
       disclosure of business activities to match global standards, and to
       rationalise their operations further,'' he said.
       ($1 equals 132 yen)
       Monday January 12, 1:53 am Eastern Time
    MOF to unveil Japan bad loan data under new system
       TOKYO, Jan 12 (Reuters) - Japan's Ministry of Finance (MOF) said on
       Monday it will announce bad loans data held by banks calculated under a
       new, stricter bank supervision system at 4.30 p.m. (0730 GMT).
       Finance Minister Hiroshi Mitsuzuka said last week his ministry would
       release an assessment of the bad loans as reckoned under the new
       ``prompt corrective action'' (PCA) system on Monday.
       Under the PCA system -- designed as an early warning mechanism for
       financially troubled banks -- financial institutions are required to
       make stricter risk assessments of each customer's financial situation
       based on advice from auditors. They must unload potentially risky loans.
       Under a different calculation system crafted by the Federation of
       Bankers' Associations of Japan, problem loans held at all Japanese
       deposit-taking financial firms totalled 28 trillion yen as of the end of
       last September. Of that, 21.73 trillion yen was held by banks.
       Analysts said bad loans calculated under the PCA system may be as much
       as three times that amount.
       Saturday January 10, 8:55 am Eastern Time
    FOCUS-Heat builds on Indonesia's Suharto to quit
       (Adds Suharto's decision to delay 15 big projects) 
       By Raju Gopalakrishnan
       JAKARTA, Jan 10 (Reuters) - Pressure mounted on Indonesian President
       Suharto on Saturday as the country's best-known opposition figure
       demanded the former general quit at the end of his term in March for
       leading the nation toward economic chaos.
       Megawati Sukarnoputri, daughter of the man Suharto replaced when he took
       power in Indonesia in 1965, said the 76-year-old president should not be
       allowed to stand for re-election.
       She said she was willing to take the helm.
       In the English text of a speech, Megawati told a chanting crowd of 500
       people in the garden of her residence on the outskirts of Jakarta:
       ``Suharto's rule as president for 32 years is quite enough.''
       ``I hereby take this opportunity to declare my determination to become
       the leader of our nation and our people if this is indeed the real
       consensus of the people,'' she said as supporters chanted ``Long Live
       Earlier on Saturday, shoppers thronged markets to stock up on essentials
       for the third day running as Indonesia reeled under the twin onslaught
       of financial turmoil and fears that food would either be in short supply
       or hit by hyper-inflation.
       U.S. and International Monetary Fund (IMF) officials were heading to the
       country to help defuse the crisis, sparked by perceptions that Suharto's
       government was backsliding out of commitments made to the IMF in
       exchange for a $43 billion bail-out plan in October.
       But late on Saturday -- in an apparent reaction to stinging
       international criticism -- Suharto ordered the postponement or review of
       15 major infrastructure projects worth several billion dollars due to
       the crisis.
       State Secretary Murdiono, quoting Suharto, told the official Antara news
       agency that the projects to be reviewed included a number of power
       plants and toll-roads.
       Megawati said the financial disaster was the work of ``economic
       ``If the nation ends up having to bear this burden then striped prison
       uniforms should be sewn for the economic criminals who have destroyed
       our nation and our economic future,'' she thundered to loud applause.
       What would just be political rhetoric in any other nation carries deep
       significance in Indonesia.
       Suharto, a former army general, has ruled the mainly Moslem nation of
       200 million people with an iron grip since he took over from founding
       president Sukarno, Megawati's father, and has brooked little dissent.
       Criticising him is a criminal offence.
       Megawati, ousted as leader of the minority Indonesian Democratic Party
       (PDI) by a government-backed faction in June 1996, is considered the
       only significant opposition figure.
       In July that year, Jakarta was hit by its worst riots in more than two
       decades after supporters of Megawati were evicted from their party
       headquarters for refusing to give way to her government-backed rival who
       replaced her as head of the PDI.
       At least five people were killed, more than a hundred injured and
       buildings and cars set ablaze by angry mobs after her supporters were
       attacked by police and rival partisans.
       Suharto is widely expected to seek a seventh five-year term of office in
       March presidential elections but Megawati said he should not be allowed
       to do so.
       A diplomatic analyst questioned whether Suharto would heed the calls to
       step down. ``Suharto is known to be a fighter,'' he said.
       Suharto's half-brother was quoted in the Kompas daily on Saturday as
       saying the former general wanted to retire but would only do so when he
       was assured that any successor could shoulder the responsibilities of
       It was a dramatic end to a day when Indonesia was looking forward to a
       weekend breather from the punishment its rupiah currency and stock
       market have been taking.
       But the focus shifted to food markets earlier in the day as crowds
       bought up rice, sugar, flour, cooking oil and milk.
       Analysts said the situation was potentially explosive, since any paucity
       of food had even greater potential than the monetary crisis to trigger
       social unrest.
       They said shortages of essentials in the Islamic holy month of Ramadan
       and the festival at the end of it could have dangerous implications for
       social stability.
       The government signalled it was aware of the danger.
       State news agency Antara said the government had raised short-term rice
       imports to two million tonnes from 1.5 million and that controlled
       prices of rice and flour would not be raised.
       U.S. President Bill Clinton intervened in the crisis on Friday, telling
       Suharto that Indonesia had to comply with the IMF reforms and announcing
       he would send Deputy Treasury Secretary Lawrence Summers to the region
       this weekend.
       Separately, IMF Managing Director Michel Camdessus and First Deputy
       Managing Director Stanley Fischer are also visiting Jakarta from early
       next week.
       Indonesia has long been a major regional ally of the United States. The
       sprawling archipelago straddles the equator for some 3,000 miles (5,000
       km) and major trade routes from the Far East to the West pass through
       its waters.
       Until last week calls for his removal were unthinkable, but there are
       now public appeals for a change in government.
       But what many analysts fear is the unrest that could accompany such
       The only political transition since Indonesia gained independence from
       Dutch colonial rule over half a century ago was when Suharto took power
       from Sukarno in 1965 after what the government claims was an abortive
       Communist coup. Some 500,000 people were later killed in anti-Communist
       Copyright ) 1998 Reuters Limited. All rights reserved. Republication or
        redistribution of Reuters content is expressly prohibited without the
        prior written consent of Reuters. Reuters shall not be liable for any
        errors or delays in the content, or for any actions taken in reliance

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