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.