Asian market ignore Indonesia's debt deal

Asian market ignore Indonesia's debt deal

SINGAPORE (Reuters): A landmark deal tackling Indonesia's massive corporate debt gave Asian markets little pre-weekend cheer yesterday.

Under the deal, international banks agreed to reschedule Indonesia's US$80 billion of private sector debt, throwing a lifeline to the country's debt-ridden firms and brightening the mood on Jakarta's stock market.

But despite sharing Indonesia's suffering in May, when political turmoil there dragged regional stocks and currencies lower, Asian markets were unable to get excited about what analysts said was an important step towards restoring financial stability in Jakarta.

"It's a step in the right direction but we are not expecting a dramatic pick-up in terms of sentiment. Too much water has passed under the bridge," said Andy Tan, general manager of Standard and Poor's/MMS in Singapore.

Stock markets in the region were mixed, most of them ignoring the Indonesia news to focus on domestic concerns, while currencies remained under pressure as the yen suffered a renewed bout of weakness against the dollar.

The dollar rose past 139 yen on vague rumors of a financial scandal involving Japanese Prime Minister Ryutaro Hashimoto.

Hong Kong stocks were up slightly, and South Korean stocks jumped after local elections backed the ruling party and its reform agenda. Japan's Nikkei average ended down and markets in Southeast Asia wilted badly as fears of looming recessions overshadowed other news.

The troubled Australian dollar continued a desperate struggle to stay above 60 U.S. cents, hitting a 12-year low in afternoon trade.

Analysts in Sydney began talking of a full-blown currency crisis and a possible rise as the central bank squared up to a market seemingly determined to see the currency below 60 cents.

Weak banking stocks weighed on Japanese shares, despite hopes that Indonesia's debt accord would help many Japanese banks which have heavy exposure to the country.

The Nikkei index ended 0.67 percent down at 15,323.42.

Hopes of a sustained rebound for the yen were dashed as the dollar rose to a high of 139.50. Traders said the yen's fall came amid rumors that Hashimoto might resign over a scandal which occurred when he was finance minister, but details were scarce.

Another currency in trouble, the Australian dollar, remained under heavy selling pressure and fell to 0.6050 to the U.S. dollar.

Analysts said the currency was bearing the brunt of Australia's heavy trade exposure to Asia and could be headed for the same fate as many currencies there.

Hong Kong shares took a back seat in Asian trade. Thin trade saw the Hang Seng Index rise 0.13 percent to end at 8,569.47.

Seoul's composite index ended up 2.73 percent, or 9.07 points, at 341.53 points on hopes that the ruling party would push ahead with economic reforms after receiving a strong mandate in Thursday's local elections.

Malaysian shares fell sharply as doubts about the government's new debt agency persisted and the ringgit weakened, dealers and analysts said.

The main Kuala Lumpur index closed at 505.05, down 2.61 percent.

The ringgit softened towards 4.00 to the dollar after Moody's Investors Service said it was considering downgrading some of the country's ratings because of the prolonged regional crisis.

Neighboring Singapore markets were also struggling amid growing concerns about local banks' exposure to the region. The main Straits Times Index closed down 1.62 percent at 1,1168.46, and the local dollar dipped towards 1.70 to the U.S. currency.

Thai shares lost 0.20 percent, led down by concerns over the country's economic problems and the likely continuation of high interest rates. The composite SET index closed at 318.16.

The yen's fall undermined the bath and it fell past 43 to the dollar.

An exception to the regional apathy was Taiwan. Stocks there ended over 1 percent higher at 7,505.58 points after the government announced a second tranche of stimulus measures to shore up the market.