Rating cut seen for Thailand, Malaysia

Rating cut seen for Thailand, Malaysia

NEW YORK (Reuter): Asian financial market turmoil would likely pull down the credit standing of Thailand, Malaysia and Korea, said John Seel, Asia economist at Bear Stearns.

In a tele-conference with investors, Seel, who is based in Hong Kong, said Thailand had not demonstrated an effective response to its financial crisis and especially to its troubled banking sector.

"Thailand has not bottomed out," he said.

Malaysia is also veering into deeper economic difficulty as the "bad policy mix" and sharp rhetoric of Prime Minister Mahathir Mohamad continued hurt investors' confidence, he said.

Korea is currently stuck in a "policy stalemate" before the presidential election in December, he said.

The government appeared inclined to "sacrifice sovereign rating to prop up the banking sector," Seel said.

In addition, the financial burdens of integrating North Korea with the South, if the unification scenario plays out in the next two to three years, would shave another notch of credit stance for Korea, he noted.

As a result, Seel said that these three countries have greater potential of receiving a downgrade than Indonesia and the Philippines.

The "trigger point" for turnaround in these once robust Asian economies is to identify the time when the governments of those countries adopt policies for long-term growth, not just short- term fixes, he said.