New IMF loan talk fails to cheer stocks
Jill Wong, Reuters, Hong Kong
News of possible fresh lending to Indonesia from the International Monetary Fund (IMF) failed to cheer the Jakarta stock market on Tuesday which tracked regional losses.
The IMF and Indonesia reached an agreement on broad economic reforms to be implemented next year, spurring hopes over the country's efforts to revive foreign investor confidence after four years of crisis. Areas covered include banking, privatization and legal issues.
The fresh program is expected to be the fourth letter of intent under a US$5 billion IMF loan program and should pave the way for fresh loans of some $400 million, with a board decision expected to be made by early January.
But analysts say investors are unlikely to return in droves until the government of President Megawati Soekarnoputri gets its act together in pushing through reform efforts.
The Jakarta stock index ended down 0.25 percent.
The Indonesian Rupiah firmed to 10,525 against the U.S. dollar by 0931 GMT (4.31 p.m. Jakarta time), in line with slight appreciation of other regional currencies and the Japanese yen which traded at 123.12 against 123.25 to the U.S dollar on Monday.
The Korean won finished higher at 1,283.0 per dollar as foreign investors poured funds into local shares, but its upside was capped by the stock market's retreat into negative territory.
Most other Asian stockmarkets gave up some of their recent strong gains, with Japan's key Nikkei 225 index losing 1.42 percent. But it is still up 5 percent in the past week.
Tokyo markets were focused on the Japanese government's plan to introduce another extra budget in less than a week after the first one, putting Prime Minister Junichiro Koizumi's reform credentials at stake.
Hong Kong's Hang Seng index fell 1.18 percent, while Taiwan's TAIEX benchmark lost 2.04 percent and South Korea's KOSPI shaved 1.61 percent after hitting a fresh year high on program buying in early trade.
The KOSPI has risen 14 percent so far this month spurred by flush domestic liquidity and growing hopes for economic recovery next year.
But analysts say the heavy debt burden of Korean corporates remains a drag on overall recovery in the short term.
"The Korean corporate sector tends to borrow more than the other industrial countries. In that sense, it's rather vulnerable," Takahira Ogawa, director of sovereign ratings, Asia- Pacific at Standard & Poor's, told Reuters Television.
Singapore dropped 0.37 percent. Bucking the trend, Bangkok gained 2.48 percent respectively.
Baring Asset Management, with $36.8 billion under management worldwide, predicted more upside for emerging markets in the next 12 months, driven by strong liquidity, a delayed but more robust global recovery and cheap valuations.
"Our increasing optimism for a global emerging market recovery is reflected in our zero cash weighting," Baring Asset Management said in a statement.