Asian assets stirred, not shaken by Argentina crisis<\/p>\n
Nick Edwards, Reuters, Hong Kong<\/p>\n
Asian markets were stirred, but not shaken on Friday by
\nArgentina's deepening crisis, with most bad news priced in and
\nfears of contagion to the region and its pegged currencies calmed
\nby flush financial sector liquidity.<\/p>\n
Asian dollar bonds barely registered the shock resignation of
\nArgentine President Fernando de la Rua after days of unrest and
\npopular revolt against economic austerity measures, with the most
\nsensitive Philippine debt bouncing swiftly from a brief dip.<\/p>\n
The pegged currencies of Malaysia and Hong Kong faced some
\npressure as financial markets anticipated a collapse of
\nArgentina's dollar-pegged currency regime.<\/p>\n
Stocks were weaker -- by three percent or more in Hong Kong,
\nSouth Korea and Taiwan -- mainly due to a Wall Street tech rout.<\/p>\n
Philippine bonds, a barometer of emerging market risk in Asia,
\nbounced back on Friday after being rocked lower on Thursday by
\nArgentina's deepening $132 billion debt and political crises.<\/p>\n
The Hong Kong dollar, the world's second-most talked about
\npegged currency, came under renewed pressure with one-year
\nforwards rising to 300 pips from 240 late on Thursday.<\/p>\n
The rate had been at 175 on Wednesday, before the onset of the
\nworst riots in Argentina's history marked the beginning of the
\nend for the country's government.<\/p>\n
Analysts say the Hong Kong dollar is still rock solid, but
\nthat doesn't mean it's irrational for traders to be cautious.<\/p>\n
\"I'm absolutely certain that (Hong Kong's) peg will stay,\"
\nsaid Pieter van der Schaft, associate director, economic
\nresearch, at Barclays Capital in Hong Kong.<\/p>\n
There's little in the Argentina crisis that would embolden
\nspeculators to go after the region's pegs, analysts say.<\/p>\n
\"There are some analogies that people might want to draw with
\nthe fixed exchange rate regimes in Malaysia and Hong Kong, but
\nfundamentally, if you look at these systems, there is credibility
\nwith the governments and the central banks,\" John Tan, a fixed
\nincome analyst at Standard Chartered Bank in Singapore, said.<\/p>\n
A host of other factors make Asia less susceptible to emerging
\nmarket contagion than before -- especially its relatively less
\nreliance on foreign capital flows than its peers.<\/p>\n
Argentina, for example, has seen net private capital flows
\nshift to an estimated deficit of $13.3 billion in 2001 from an
\naverage annual surplus of $14.7 billion in 1997-99, according to
\nU.S. investment bank, JPMorgan.<\/p>\n
Bank deposits of about $1.7 trillion, the highest domestic
\nsavings rate in world, huge foreign reserves and strong external
\ntrade balances provide considerable insulation to Asia.<\/p>\n
So too do foreign debt piles that have shrunk since the
\nregion's crippling financial crisis of 1997\/98.<\/p>\n
Measured against short term debt, international reserves in
\nThailand, Indonesia and the Philippines cover 260 percent, 194
\npercent and 146 percent respectively in 2001.<\/p>\n
\"Official institutions generally feel that a country's
\nreserves should be at least equal to its short term debt. (These
\neconomies) amply meet this test,\" JPMorgan said in a client note.<\/p>\n
That's not to say there are no risks facing Asian economies,
\njust that investors don't see them originating from Argentina.<\/p>\n
\"The weakening of the yen is a bigger risk,\" Carl Wong, credit
\nanalyst at Bank of America in Hong Kong, said.<\/p>",
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"sponsor": "Okusi Associates",
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