Currency storm heads for Hong Kong<\/p>\n
By Nick Cumming-Bruce<\/p>\n
SINGAPORE: Modest recoveries by the currencies of Indonesia,
\nThailand and the Philippines -- which have been Asia's weakest --
\nWednesday brought governments and dealers a welcome respite from
\nweeks of frantic activity, but no peace of mind.<\/p>\n
Now fears are focussing on the Hong Kong dollar -- even with
\nits huge Chinese support.<\/p>\n
After slumping to an all-time low against the dollar on
\nTuesday, Indonesia's rupiah rebounded strongly, buoyed by a sharp
\nhike in interest rates and government certificates on Tuesday.
\nThe Thai baht followed the rupiah upwards, as the country awaited
\nIMF approval yesterday for a US$16 billion bail-out package.<\/p>\n
"It's the eye of the storm," warns Bill Belchere of Merrill
\nLynch & Co in Singapore. "It's passing over head, but it's not
\nover."<\/p>\n
In little more than a month, the baht, rupiah and Philippine
\npeso have all cut their links to the dollar, leaving Southeast
\nAsia's central banks groping in new territory where neither they
\nnor dealers can yet determine the currencies' fair value.<\/p>\n
Markets in North East Asia are also now a source of anxiety.
\nSouth Korea's currency has emerged as an obvious target, falling
\nto a record low against the dollar on Tuesday.<\/p>\n
"It's likely to succumb in the next few weeks," an economist
\nbased in Singapore said, pointing to parallels with Thailand,
\nwith its $40 billion of short-term debt maturing over the next
\nyear, the strain on its banks and growing fears of a liquidity
\ncrunch.<\/p>\n
The consolation is that the South Korean government may
\naccelerate and broaden moves to liberalize its closed capital
\nmarkets.<\/p>\n
But Korea's predicament is overshadowed by the problems in
\nHong Kong, which is defending the last of Asia's dollar pegs. "If
\nthe Hong Kong dollar comes under pressure then there are no holy
\ncows. That's as impregnable a fortress as you can find in Asia,"
\nobserved PK Basu of UBS in Singapore.<\/p>\n
Hong Kong chief executive Tung Chee-hwa confidently predicts
\nspeculative attacks will fail. After the Chinese central bank's
\npledge of support, he has the deepest pockets of any government
\nin the region -- combined reserves of $196 billion -- as back-up.<\/p>\n
That did not prevent the Hong Kong stock market plunging 3.8
\npercent on Tuesday and a sharp rise to 11 percent in interbank
\nrates, which are usually more or less in line with U.S. rates at
\n5-5.5 percent.<\/p>\n
"We have to hope in Asia that the speculators will go away
\nwhen they realize Hong Kong is impregnable, then we are out of
\nthe woods," a financial analyst here commented.<\/p>\n
But there are heretics who doubt the speculators will leave or
\nthat the last of Asia's dollar pegs can survive. "It's a thing
\nthat's had its time," said a western banker, insisting on
\nanonymity. "The rest of Asia has just realigned 20 percent, how
\nlong can these guys hold out? Do they really want to burn $20
\nbillion defending their currency?"<\/p>\n
Analysts predict that the volatility which would follow a
\nfloat of Hong Kong's currency would spill into other emerging
\nmarkets. Already, the uncertainty in Hong Kong is feeding
\nanxieties in Southeast Asian markets long after currencies there
\nhave hit levels that historically should make them highly
\nattractive.<\/p>\n
Even with credit lines of close to $20 billion put up by the
\nIMF, Japan, and other countries and institutions, the Thai
\ncurrency is poised to slide in coming months from its present
\nlevel of about 32 baht to the dollar to nearer 35 baht, say
\neconomists.<\/p>\n
Not so the rupiah which looks poised to lead a recovery after
\na fall that Wong Yit Fan, chief Asia-Pacific economist of
\nStandard Chartered Bank in Singapore, called "kind of surreal".
\nDesmond Supple, head of regional currency research at BZW Asia,
\nsaid: "There's going to be a pull-back. It's getting to the point
\nwhere local markets are looking extremely cheap in dollar terms."<\/p>\n
The question is, when?<\/p>\n
-- The Guardian<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/currency-storm-heads-for-hong-kong-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }