Jakarta's reforms ease worst fears<\/p>\n
HONG KONG (Dow Jones): Indonesia has put to rest the markets'
\nworst fears by announcing this week that it has complied with the
\nfirst major set of reforms under the International Monetary
\nFund's $43 billion restructuring program.<\/p>\n
But it will still be a while before there's room for Asian
\ncurrencies and share prices to move significantly higher,
\neconomists said.<\/p>\n
Worries about Japan's economy may continue to undermine the
\nyen, dragging all regional currencies lower against the dollar.<\/p>\n
And markets will still be watching to make sure Indonesia
\nadheres to its promised reforms<\/p>\n
\"We certainly haven't gotten to the fine print,\" said Callum
\nHenderson, managing director for currencies at MMS International.<\/p>\n
Last month it seemed possible that Indonesian President
\nSoeharto would turn his back on the IMF, a move that would have
\nhad disastrous consequences for all Asian markets.<\/p>\n
But the chance of a complete break with the IMF now looks
\nremote, according to Marshall Mays, chief strategist at Nikko
\nResearch Center (Hong Kong) Ltd.<\/p>\n
\"How it's going to work out I'm not really clear, but it will
\nwork out,' Mays said, summing up what he said is the current view
\namong foreign exchange traders.<\/p>\n
Indonesian Planning Minister Ginandjar Kartasasmita said this
\nweek the exchange rate shows that markets believe Jakarta has
\ndone everything required to-date by the IMF. The rupiah has
\nstrengthened to around 7,900 per dollar late Friday in Asia, from
\nabove 10,000 per dollar about a month ago, helping other
\nSoutheast Asian currencies rebound.<\/p>\n
Ginandjar at mid-week announced government plans to privatize
\nsome state companies, to lift an much-watched export ban on palm
\noil and change bank regulations regarding bad loans.<\/p>\n
Meanwhile, Asian currencies have also been helped by signs
\nthat the current account positions of many regional countries are
\nimproving, a result of the greater export competitiveness that
\nhas followed the recent currency depreciations and a cutback in
\nimports.<\/p>\n
The current account positions are improving while other
\nindicators remain dismal -- the IMF, the Organization for Economic
\nCooperation and Development and the Asian Development Bank all
\nrecently slashed their growth estimates for regional economies.<\/p>\n
The Manila-based ADB forecast this week that 1998 will be
\nAsia's bleakest for almost a quarter century, with inflation,
\nunemployment and corporate defaults all seen rising.<\/p>\n
Indonesia will see its GDP collapse 3 percent and the country
\n\"will take about three years to recover fully,\" said the ADB of
\nwhat it considers the worst affected country.<\/p>\n
Even so, analysts say regional currencies have been helped by
\nthe gradual return of liquidity to the markets. The collapses
\nthat took place in December and January came at a time when there
\nwas little two-way trading interest.<\/p>\n
\"Over the past few weeks, currencies as a whole have shown
\nmore stability,\" said Henderson at MMS International. \"Currencies
\nhave rebounded on liquidity, although the markets have (also)
\nstarted to focus on fundamentals.\"<\/p>\n
But analysts also doubt there's much extra upside potential
\nfor Asian currencies at this point.<\/p>\n
From all-time lows in January, the dollar has already given
\nback a whopping 49 percent against the rupiah, 20 percent on the
\nMalaysian ringgit and 26% on the South Korean won.<\/p>\n
Guonan Ma, head of Asia-Pacific economics research at Salomon
\nSmith Barney, said Asian currencies have very little scope to
\nrise so long as the yen remains weak. And that's likely to be the
\ncase -- Salomon economists figure the dollar will rise to 140 yen
\nwithin a few months, from around 129.80 yen presently.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/jakartas-reforms-ease-worst-fears-1447893297",
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