Regional money markets brace for eventful week

Regional money markets brace for eventful week

SINGAPORE (AFP): Southeast Asia's financial markets will focus
on key economic reform measures to be announced this week in
Thailand, Malaysia and Indonesia that could hasten the pace of
recovery of regional currencies emerging from their lowest ebbs,
analysts say.

"I think a period of tranquility will continue to reign," said
Vincent Low, fixed income strategist at Merrill Lynch in
Singapore, as he forecast currency trading patterns after the
slight recovery in the Indonesian rupiah, Malaysian ringgit,
Philippine peso and Thai baht most of last week.

"Volatility will be low as market participants will probably
wait for the key announcements and analyze them," he said.

Thailand is scheduled to announce on Wednesday a major revamp
of the country's troubled financial sector while Malaysia will on
Friday unveil its national budget which Finance Minister Anwar
Ibrahim vowed would contain the right stimulant to perk up the
economy.

Indonesia, meanwhile, is expected to provide details on how
the International Monetary Fund (IMF), which Jakarta has called
to rebuild shattered confidence, will help to strengthen its
financial sector.

A foreign exchange dealer with a European house said
"positive" statements from the three nations would enhance the
pace of recovery of the Southeast Asian currencies, which last
week posted their first sustained gains since regional foreign
exchange turmoil erupted on July 2 with Thailand's effective
devaluation of the baht.

Analysts said Malaysian Prime Minister Mahathir Mohamad's
remarks over the weekend on a so-called Jewish connection to
currency turmoil in the region was unlikely to have an impact on
the markets.

Billionaire US financier George Soros, accused by Mahathir
earlier of masterminding the attack on the ringgit and other
regional currencies, is a Jew.

"The market is slowly discounting what Mahathir says, as
clearly evident last week when the ringgit rose despite his
remarks which the market previously perceived as negative," Jimmy
Koh, regional economist with London-based financial house
I.D.E.A.

Foreign exchange analysts said recovery of the battered
Southeast Asian currencies would be gradual.

"Basically, it's going to be a slow adjustment in terms of
improvement for the currencies when it comes," said Daragh Maher,
analyst with ING Barings.

"The recovery so far is sentiment-driven rather than
fundamentally-driven so it all depends on the pace of real
reforms," he added.

Following the recovery last week, the Indonesian rupiah, which
at one point lost more than half its value due to the regional
currency crisis, is now down by 38 percent to 3,360 against the
US dollar since July 1.

The Thai baht's value has fallen by 44 percent to 35.60
against the greenback, the Philippine peso by 27 percent to
33.52, the Malaysian ringgit by 21.5 percent to 3.0670 and the
Singapore dollar by 7.2 percent to 1.5330.

"I think the resistance level the coming week will be at 3.000
for the ringgit and 3,400 for the rupiah," Low of Merrill Lynch
predicted.

Analysts said currency markets would particularly watch
Thailand's financial restructuring program to be released on
Wednesday to overcome enormous problems bugging its financial
sector amid a deepening credit crunch.

They said news over the weekend about the quitting of key
members of a Thai committee overseeing the rescue of crippled
finance firms due to alleged political pressure might not have an
immediate impact on the market.

"No one is going to jump to conclusions. They will wait for
Wednesday," Koh of I.D.E.A. said.

Thailand's seriousness in putting its house in order after it
received a global 17.2-billion-dollar aid package is being gauged
because any renewed attack on the baht will lead to another
meltdown in neighboring currencies.

Nearly half of the financial institutions in Thailand have
been ordered to suspend their operations because of chronic cash
flow and bad debt problems.

"The big question is whether we are really going to see
something positive from the Thai government this time or is it
going to be an anti-climax," said Alison Seng, analyst with US
research house Standard and Poor's MMS in Singapore.