Regional market focuses on Indonesia
Regional market focuses on Indonesia
SINGAPORE (AFP): Indonesia will be under the regional market
spotlight this week as Jakarta overhauls its banks and grapples
with political uncertainty ahead of the June polls, dealers and
analysts said.
Most regional currencies ended firmer last week, buttressed by
the yen, which surged in New York late Friday to 118.70 per
dollar, from 122 levels a week before, despite Tokyo's release of
dismal economic figures for 1998.
The Bank of Japan (BoJ) decided Friday to leave monetary
policy intact, surprising players who had sold down the yen on
expectations of an easing, although the BoJ vowed to hold down
short-term interest rates.
Dealers attributed the yen's pre-weekend spike to real and
perceived repatriation of funds by Japanese companies before the
1998 fiscal year ends this month, on top of foreign money pouring
into Tokyo stocks.
"There won't be much (news) from Tokyo because the BoJ meeting
is finished," a chief currency dealer in Singapore said of the
week ahead. "The market will have nothing to trade on."
"The most interesting thing is whether Indonesia will follow
through on the closing of the banks," he said.
Political uncertainty persists in the run-up to Indonesia's
elections amid rising sectarian violence in the countryside, but
the dealer said violence had already been "factored in" as long
as Jakarta stays calm.
Indonesian Finance Minister Bambang Subianto announced
Saturday that the government will close 38 ailing banks and take
over seven others.
The Indonesian rupiah closed the week lower at 9,150 from
8,900 the week before amid strong dollar-buying ahead of the
announcement. It hit a low of 9,600 before profit-taking set in.
Jakarta was supposed to launch the shake-up on February 27 but
announced at the last minute that it was delaying the decision by
two weeks.
Indonesian banks have been left reeling by the 21-month-old
Asian financial crisis, which prompted Jakarta to go to the IMF
for a $46 billion financial bailout package in December 1997.
Daniel Lian, head of Asian markets research at ANZ Investment
Bank in Singapore, said markets were "impatiently waiting" for
Indonesia's decision on the bank recapitalization plan.
"A perception of non-bias towards politically connected
businessmen would give one positive signal to the market, in an
environment that is filled with pessimism," he said.
Another 73 Indonesia banks in the "A category" met the capital
adequacy ratio (CAR) requirement to stay open.
Seven state banks and four private banks in government control
since last year will be recapitalized because of their strategic
roles. Together they hold an estimated 69 percent of the market
share in Indonesia.
Four of the state banks -- Bank Ekspor Impor, Bank Dagang
Negara, Bank Bumi Daya and Bank Pembangunan Indonesia -- will be
merged by mid-1999.
Most regional currencies ended the week firmer. The Philippine
peso rose to 38.97 pesos to the dollar from 39.125 the week
before, the South Korean won to 1,233 from 1,243, the Taiwan
dollar to 33.112 from 33.147, and the Thai baht to 37.35 from
37.60.
Markets in Thailand cheered the passage of bankruptcy law
which was seen as vital in rehabilitating the economy where the
Asian crisis exploded in July 1997.
Economists in Singapore meanwhile concurred that the local
dollar, relatively strong compared to its neighbors' currencies,
was headed for further weakness toward the end of the year to
1.80 to 1.90 against the U.S. dollar. It closed last Friday at
1.7335, down from 1.7295 the week before.