IMF rules needed to rein in speculators

IMF rules needed to rein in speculators

BANGKOK (AFP): Southeast Asian countries beset by turmoil in
their financial markets will push the International Monetary Fund
(IMF) for rules to rein in speculators at next week's global
monetary talks, officials said yesterday.

"We have deliberated and we will submit (our position)," said
Malaysian Deputy Premier and Finance Minister Anwar Ibrahim. "The
general feeling, the consensus, has been reached."

The Association of Southeast Asian Nations (ASEAN) was "quite
pro-active on this," he said at yesterday's Asia-Europe Meeting
(ASEM) of finance chiefs here.

The statement came ahead of annual IMF-World Bank meetings in
Hong Kong.

Anwar at the ASEM gathering earlier yesterday lashed out at
speculators whom he and Prime Minister Mahathir Mohamad have both
blamed for Malaysia's currency and stocks market woes.

"A market without supervision will fall prey to financial
gunslingers," Anwar said.

Just as democracy can only function if there is rule of law, a
free market must also be based on "established rules," Anwar
said.

He noted that the IMF had introduced guidelines for prudent
regulation and supervision of banks, but no rules had been put in
place to guide the behavior of hedge funds and investment houses.

He said rules for speculative funds should be enforced
including acceptable ethical standards and aim to prevent
excessive speculation and control "irrational behavior of fund
managers who tend to take excessive risks to the detriment of
countries."

Anwar told reporters afterwards that Asian delegates were
generally supportive of the idea while the "Europeans are quite
muted."

"Hopefully they (Europeans) are seriously considering. They do
not have immediate answers."

The Malaysian finance minister said further liberalization in
the financial sector being pushed by the West should be
accompanied by "an effective mechanism" to "regulate, supervise
and protect the markets, particularly the emerging markets
against speculators and abusers."

Hedge funds and investment houses have been blamed for
hammering down regional currencies since the Thai baht's de facto
devaluation on July 2. Regional stock market indices have also
dived.

Anwar noted that credit lines arranged by the IMF for
economies in trouble were conditional on governments adhering to
economic adjustment programs.

"Why not also ensure that hedge funds, investments, that
caused this instability are also regulated? Otherwise, the rich
guys tell us what to do and we have to be obedient and silent,"
he said.

He said countries such as Thailand, Malaysia and Indonesia had
been under "tremendous pressure to liberalize without adequate
infrastructure and controls in place."

"Whilst we are committed to further liberalization, we want
this to be well regulated so that we can protect the general
public and the economy from excessive speculation," Anwar said.

But European Union finance commissioner Yves-Thibault de
Silguy, who attended the maiden meeting, dismissed the storm
which has sent the region's currencies and stocks plummeting, as
a reason for delaying market opening.

"The Asian crisis is not a reason to delay the WTO agreement,"
he said. "There's no link between the monetary crisis and freedom
of capital movements. "

Anwar urged the IMF to institute an immediate study to
determine guidelines for hedge funds and investment houses, and
expressed confidence that the global agency's chief, Michel
Camdessus, would respond positively to the appeal.

"Michel Camdessus, I believe, is generally supportive of the
idea because that has been the function of the IMF. I believe
therefore that with the concerns expressed, he will respond
positively."

Singapore Finance Minister Richard Hu told the ASEM that
recent events in Southeast Asia showed that "while financial
markets are a useful barometer of economic conditions, they can
take a life of their own."

"Market reactions can be exaggerated," he said, adding that a
minor reallocation of portfolios by global fund managers could
destabilize under-developed currency and stock markets.