KL calls for establishment of SE Asian forex market

KL calls for establishment of SE Asian forex market

KUALA LUMPUR (AFP): Malaysia's central bank chief Saturday
called for the setting up of an Southeast Asian market for
financial instruments and currencies to accommodate increasing
cross-border flows of capital.

"We need active intra-regional foreign exchange and financial
markets to promote the investment of a rising volume of cross-
border capital and working funds," Bank Negara governor Ahmad
Mohd. Don said.

Capital must move and funds must be raised, and a regional
market should complement the national market in resource
allocation, he said.

The potential exposure of cross-border investment must also be
hedged effectively, he told bankers from Thailand, Indonesia,
Singapore and Malaysia attending the first Forex Southeast Asia
forum in Kuching, capital of Malaysia's eastern Sarawak state.

The forum was recently organized to develop new financial
instruments in the region and support the spread of information
on foreign exchange and money market management, banking
officials said.

"The necessary safeguards, however, must be put in place first
to ensure successful development of a viable and sustainable
regional financial market and minimize payment and settlement
risks in multilateral cross-border dealings," Ahmad Don said.

Analysts said the caution exercised by Malaysia's central bank
was expected, having incurred some US$6 billion in losses in
international foreign exchange dealings over the last two years.

Those losses led to the resignation of Ahmad Don's
predecessor, Jaffar Hussein, and a ban since April on all forward
contracts in international currencies. The bank now deals in
foreign exchange on a spot basis, officials said.