Regional currencies come under renewed pressure

Regional currencies come under renewed pressure

SINGAPORE (AFP): Southeast Asian currencies have come under
renewed pressure after Malaysia and the Philippines received
credit-outlook downgrades and a proposed regional bailout fund
failed to take off.

Last week's annual meetings of the International Monetary Fund
(IMF) and the World Bank in Hong Kong gave a mixed reception to a
still hazy plan to set up a multi-billion-dollar war chest to
defend economies from financial raiders.

Markets are meanwhile awaiting developments in Thailand after
its parliament backed a new anti-corruption constitution and kept
Premier Chavalit Yongchaiyudh's shaky coalition in power by
voting down a censure motion.

U.S.-based credit rating agency Standard and Poor's on
Thursday cited fears of a decline in Malaysian bank asset quality
when it downgraded the country's long-term foreign currency
credit outlook from "stable" to "negative."

The revision sent the Malaysian ringgit crashing to a new
record low of 3.1450 to the dollar, although it recovered to
close at 3.1220 on Friday, when the ratings agency turned its
sights on the Philippines.

Standard and Poor's lowered Manila's long-term foreign and
local currency rating outlook from "positive" to "stable,"
reflecting the fall of the peso and the country's economic woes.
The peso closed marginally lower at 33.52 pesos.

The same day, the Indonesian rupiah plunged to an all-time low
of 3,125 to the US dollar on worries about the country's banking
and corporate sectors and fears that its credit outlook was next
on the downgrade list.

The Thai baht closed weaker at 35.20 to the dollar offshore
Friday ahead of Saturday's vote in Bangkok on the constitution
and the censure motion. The Singapore dollar, affected by
regional uncertainty, was also lower at 1.5230 to the US dollar.

Following the key Thai parliamentary vote Saturday,
speculation shifted to whose heads will roll as Premier
Chavalit, paying the price for political survival, negotiated
with coalition partners on the makeup of his cabinet.

Southeast Asian currencies have fallen sharply since the Thai
baht's de facto devaluation in early July shattered international
confidence in the once booming region, which is now facing an
economic slowdown.

Officials of the IMF and World Bank, along with some western
countries, last week reacted frostily to a proposed new facility
to help stabilize troubled Asian economies. Japan is supporting
the plan but the United States would only go so far as to agree
to discuss the idea.

As Southeast Asian countries pressed their case of a bailout
fund, bankers and economists were divided on the need for, and
viability of, a new facility apart from the IMF, the traditional
banker of last resort for member countries.

Thai Finance Minister Thanong Bidaya said during the IMF and
World Bank meetings that the fund could be as large as US$100
billion.

Eddie Lee, regional economist with investment house Vickers
Ballas in Singapore, said "on the one hand, there is an argument
that the fund is needed as a disincentive to speculators."

But he said "there are people opposed on the argument that if
countries are going to be bailed out so easily, then there is no
incentive" for countries to watch after their economies more
carefully.

A European banker who attended the IMF and World Bank sessions
said the bailout plan was "basically a very good idea because it
creates a feeling of togetherness and a feeling of unity which is
always good for a region."

Asked about the view that a bailout fund might encourage
irresponsible behavior, like giving a teenager a credit card, he
said: "It's a matter of the limit. If it's unlimited then you're
in deep trouble."