Barings suspends trading

Barings suspends trading

JAKARTA (JP): Barings Securities Indonesia (BSI), a major
brokerage company on the Jakarta Stock Exchange (JSX), suspended
trading activities yesterday in the wake of the derivatives
dealing scandal involving its London-based principal company.

Achmad Daniri, a JSX director, said that BSI was voluntarily
suspending its trading activities until the financial scandal of
its parent firm settles down.

"BSI told us in the morning about its voluntary suspension. It
also promised to settle all its financial responsibilities for
all its transactions made until Friday," Achmad told The Jakarta
Post about the position of Baring Bank's Indonesian affiliate.

Barings Bank, a London-based merchant bank, was placed in
administration by London's financial authorities after losing
more than $750 million in unauthorized derivatives trading in
Singapore.

BSI, an affiliate of the British bank, topped the list of the
most active brokerage companies in Indonesia last year, with
total transactions of around Rp 2.84 trillion (US$1.32 billion).

Last week, the brokerage firm took the fourth position among
the most active dealers on JSX, with total turnovers of over Rp
54.56 billion (US$25.37 million).

Richard Fischer, an executive of BSI, refused to comment on
the trading suspension and said only that his company would try
to do its best for its clients.

"I have no comments right now...I will tell you later," he
told the Post about the financial crisis of BSI's parent company.

BSI's president, John Marshall, said in a statement here last
night that BSI is a separate legal entity and is not subject to
the British administration order, which has been imposed on other
parts of the Barings group.

"The unauthorized activity did not involve PT Baring
Securities Indonesia in any way and the company's balance sheet
reflects the strength of its underlying securities trading and
corporate finance business," Marshall said.

He said BSI intends to continue operations and to meet all
obligations entered into at present. However, no new transactions
will be entered into pending completion of discussion with
various parties.

Markets

Share prices on major Asian markets including Tokyo, Taiwan,
Singapore and Malaysia as well as Sydney were battered by panic
selling yesterday in a domino reaction to the Barings crisis.

The fragile pound sterling crashed to a record low against the
German mark and stocks fell worldwide yesterday.

Investors absorbed the uncomfortable news that a 28-year-old
Barings trader in Singapore had apparently lost more than the
bank's worth through investments in stock futures contracts in
Japan.

The Tokyo stock market plummeted 3.8 percent, with the Nikkei
average tumbling 664.24 points to close at 16,808.70, its lowest
since December 8, 1993. Sterling sank to a fresh record low of
2.2950 marks in early European trading after dropping to 2.2993
marks in Asia and it continued weak in European trading. By 1130
GMT it was trading at 2.3055 marks in London.

"The pound just stepped off a cliff this morning," said a
dealer at a British bank in Sydney.

The London stock market opened nearly 1.3 percent weaker, but
later regained some of its composure. At 1130 GMT the Financial
Times-Stock Exchange index of 100 leading shares was down 23.7
points at 3,014.0. The Paris bourse retreated about one percent.
In several countries, bank shares bore the brunt of the day's falls.

The one bright spot among major world stock markets has been
Wall Street, which on Friday closed at a record high, but it too
is likely to be nervous about the new blow to world confidence.

Analysts in London were quoted by Reuter as saying money was
heading into safe havens, particularly the German and Swiss
currencies.

"The mark is gaining in strength as a European safe-haven
currency," said Eric Fishwick, senior analyst at Japanese bank
IBJ International. "We're seeing massive movement into the mark,"
said Ian Francis, foreign exchange manager at Commerzbank in
London. "Uncertainty in other markets is causing it -- there are
problems and political worries across the board."

Securities analysts in Jakarta, however, played down the
impact of the futures dealing scandal on the local market despite
the leading position of Baring's operation in Indonesia.

"The people are, of course, afraid about the possible sell-off
of Baring's holdings. But I don't think there will a big impact
on the local exchange," said FT Chong, a senior capital market
analyst at Bank Dagang Nasional Indonesia.

Securities dealers said that trading activities on the JSX
were normal, with the JSX Composite Index declining only slightly
to 452.56 yesterday from 454.69 last Friday.

Daniri, the JSX director, also saw no significant impact of
the futures trading scandal on the local market, saying that the
British brokerage company's own portfolio investment on the local
market is too small to affect the market.

"Baring's own portfolio investment is not so significant and I
think the impact will be also minimal," Daniri said when he was
questioned about Baring's possible sell-off on the JSX. (hen)