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.