Asian financial markets slide as violence rocks Indonesia

Asian financial markets slide as violence rocks Indonesia

SINGAPORE (Reuters): Violence in Indonesia shook most Asian financial markets yesterday, as the Jakarta stock index slumped more than 8 percent at one point and the rupiah sank.

Late in the Asian day, the announcement by India's government of two further underground nuclear tests battered share markets there and the rupee weakened.

In Singapore, the key Straits Times Industrials Index shed more than 6 percent, following the deaths of six students in a Jakarta protest on Tuesday, but rebounded before the close. At least one man died in further clashes yesterday.

Hong Kong's Hang Seng index suffered its biggest point drop in more than two months.

Of the major markets, only Japan and South Korea bucked the trend and posted gains.

The Jakarta composite index was 8.01 percent down by 0655 GMT at 396.04 points as new student protests broke out in several cities. But it later recovered to close just over the key 400 level. It ended down 6.61 percent or 28.47 points at 402.06.

At least one person died in anti-government riots yesterday near a Jakarta university where the six students were killed in clashes with security forces a day earlier.

Shares in companies linked to the family of President Soeharto came under heavy pressure. Soeharto is currently in Cairo for a Group of 15 meeting.

The rupiah slumped below the 10,000 level, where it was two months ago, to trade at 10,750/10,850 to the dollar at 0850 GMT, before recovering slightly. In Tokyo the yen dipped below 134 to the dollar.

Top Indonesian economics minister Ginandjar Kartasasmita told Reuters Television yesterday that Jakarta must respond somehow to the demands of student protesters.

Liquidations in other Southeast Asian stock markets and concerns over high interest rates in Hong Kong also fueled the market's bearishness in Singapore.

The Straits Times Industrials Index was down 6.86 percent or 96.07 points at 1303.98 in late afternoon trade, but recovered to close at 1,331.98, down 4.86 percent or 68.07 points on the day.

In Hong Kong the Hang Seng index closed down 3.78 percent or 372.22 points at 9,469.29, its biggest drop since March 5.

"People are expecting trouble in Indonesia, and it is hard to tell how much is discounted, but the writing on the wall is that trouble is brewing," said Howard Gorges, a director at South China Brokerage.

Stocks sensitive to interest rates were particularly hard hit as local interbank rates rose amid talk of increased speculation against the Hong Kong dollar.

"Riots in Indonesia continue to worsen, Asian currencies are mostly lower and regional stocks generally dropped between one to two percent this morning so Hong Kong is no exception," said Percy Au-Young, sales director at DBS Securities.

The tension was heightened by rumors in New York on Tuesday, denied by the Hong Kong Monetary Authority, that it had instructed major banks not to provide liquidity on Hong Kong dollar forwards beyond three months.

Despite the denial, Hong Kong's interbank rates were sharply higher at yesterday's fixing.

Thailand's SET index shed 2.81 percent or 10.73 points to 370.92, on finance sector recapitalization concerns, while in Manila the main share index fell 2.30 percent or 50.85 points to close at 2,163.67, its lowest close in nearly two weeks.

Sydney shares were marginally down, the All Ordinaries index shedding 0.47 percent or 13.2 points to 2,773.7.

In Tokyo, the Nikkei 225 index closed up 0.14 percent or 21.33 points at 15,343.81, after moving in a negative zone all day, helped by a report that financial giants Nomura Securities Co Ltd and Industrial Bank of Japan would tie up. Their shares climbed sharply shortly before the market closed.

In Seoul, the index closed up 1.34 percent or 4.72 points at 356.58, fueled by foreign buying in blue chips.

Taiwan stocks shed 0.91 percent to 8,202.90, while Shanghai's hard currency B share index closed down 1.60 percent at 47,519.

News of India's further nuclear tests caused panic selling in Bombay, where the index for the exchange's top 30 shares had lost 4.08 percent, or 160.78 points, in late trade to 3,784.35.