Fragile Indonesia, yen lead Asian markets lower

Fragile Indonesia, yen lead Asian markets lower

SINGAPORE (Reuters): Fears of renewed violence in Indonesia and record lows for the yen pushed Asian markets downwards on Monday.

Shares in Hong Kong, Southeast Asia and Australia closed lower, although the Tokyo stock market managed to recover from a morning slide to close 0.9 percent higher at 15,384.5.

Hong Kong's Hang Seng Index lost 1.3 percent and ended at 9,412.0.

"I think people are quite concerned that a repeat of the (Indonesian) violence last week is a possibility," said Andrew Fernow, director of research at Vickers Ballas in Hong Kong.

Like most Asian markets, Hong Kong closed before the speaker of the Indonesian House of Representatives called on President Soeharto to resign, raising the possibility that Indonesia's ailing leader would indeed step aside to satisfy the mobs that have rioted over the past week.

Before that news broke, more violence seemed likely, especially since Indonesian Moslem leader Amien Rais had declared he would bring millions of people onto the streets on Wednesday.

The U.S. dollar surged above 135.42 yen in early European trade, its highest level since September 1991, as the market seized on the absence of explicit support for the fragile Japanese currency from the weekend meeting between leaders of the Group of Eight major economies.

The yen led other Asian currencies downwards, especially the battered Australian dollar, which traded at 62.11 U.S. cents in London, just above its 11 1/2 year low.

"Everything hinges on the yen," said one dealer in Taipei as the Taiwan dollar fell sharply to a close of 33.765 per dollar.

Indonesian shares rallied briefly before the close after House speaker Harmoko issued the call for Soeharto to quit, but the Jakarta market still finished 4.2 percent lower at 388.9.

Australia's All Ordinaries index lost 1.2 percent, to close at 2733.3, with stocks exposed to Indonesia leading the way.

It was much the same story across Southeast Asia: Singapore shares were down 2.3 percent to 1291.7, Kuala Lumpur down 3.0 percent to 550.0 and Bangkok down 3.3 percent to 357.2.

The Thai market was also worried that the authorities would shut more of the country's financial institutions.

Taipei shares finally rallied as investors decided that the falls of the previous five days had reflected Indonesian instability quite enough.

"The instability in Indonesia would surely slow down the future recovery of Southeast Asian nations," said Beyond Asset Management president Michael On in Taiwan. "However, the recent Taiwan index falls should have mostly reflected the negative impact."

The Taiwan market closed 0.8 percent higher at 8134.89.

Analysts said the G8's silence on currency levels was taken as a green light by the markets, which were aching to buy the dollar as a hedge against Asian turmoil but had been restrained by fears of central bank intervention.

The final communique from the G8 meeting in Birmingham welcomed Japan's latest fiscal stimulus package, with the usual proviso that more deregulation would be helpful, but made no mention of currencies.

"It looks like they have stopped talking it (the dollar) down for the time being," said one analyst. "The market wants the dollar higher against the yen and it hasn't finished yet."

Seoul shares closed 1.9 percent higher at 359.0 on buying from small investors bullish about easier labor tension.

The won followed other Asian currencies lower, however, and closed at 1,444 per dollar, compared with Friday's close of 1,436.

The Singapore dollar fell through 1.65 per dollar, although it had recovered to 1.6490 by 1200 GMT.

The Malaysian ringgit fell to 3.8100 per dollar, from the previous close of 3.7800, and the baht fell to 39.25 from 38.90.