SE Asian monies post strong gains against yen

SE Asian monies post strong gains against yen

SINGAPORE (AFP): The currencies of Southeast Asian economies
have posted strong gains against the yen, making it cheaper for
them to service Japanese debt and import key components to fuel
industrial growth.

But Japanese investments in the export-driven region could
drop if the yen weakness persists, analysts warn.

The yen has for long been seen as an expensive currency in
Southeast Asia, which sources most of its machinery imports from
Japan to stoke manufacturing growth. Much of the region's debt is
also yen-denominated.

While the U.S. dollar had been appreciating rapidly against
the yen and many Southeast Asian currencies, the Japanese unit
was losing steam against the regional currencies, analysts said.

"The yen has weakened against most Southeast Asian currencies.
The ramifications of the movement of the regional currencies
against the yen may be greater than that against the U.S.
dollar," Jacqueline Ong, analyst with British financial
consultancy I.D.E.A., told AFP.

Ong said that since June last year, the Malaysian ringgit had
appreciated 14.48 percent against the yen, the Philippine peso
added 12.8 percent, the Singapore dollar gained 10.79 percent,
the Thai baht risen 10.51 percent and the Indonesian rupiah
appreciated 9.7 percent.

The US dollar, meanwhile, posted a 13.43-percent rise against
the yen during the same period. It was trading at about 122 yen
on Wednesday.

Against Southeast Asian currencies, the greenback has climbed
1.9 percent against the rupiah, 0.2 percent against the peso, 1.2
percent against the baht and 2.6 percent against the Singapore
dollar but declined 2.1 percent against the Malaysian ringgit so
far this year, studies by NatWest Markets here showed.

"Considering the fact that Japan is the main provider of
regional imports and much of the region's debt is yen-
denominated, the yen's weakness will be to Southeast Asia's
advantage," Ong said.

The Association of Southeast Asian Nations (ASEAN) accounts
for about 16 percent of Japan's trade while Japan accounts for
about 19 percent of the seven-member grouping's total trade,
officials said.

Most of ASEAN, comprising Brunei, Indonesia, Malaysia, the
Philippines, Singapore, Thailand and Vietnam, import intermediate
and capital goods for the manufacturing sector in line with the
region's export-oriented economic growth policy, they said.

Yen-denominated debt as a percentage of gross national product
was, according to 1995 World Bank figures, about 28 percent for
Indonesia, 23 percent for the Philippines, 20 percent for
Thailand and 14 percent for Malaysia.

Andy Tan, general manager of U.S. finance house MMS
International in Singapore, warned that a sustained weakness in
the yen could slow down Japanese investment flows into the region
and enhance the value of US-dollar-denominated debt.

"On the flipside, a sustained weakness in the yen may slow
down Japanese investments in Southeast Asia although I don't
think the yen weakness will be sustained," Tan said.

Japan's direct investments in ASEAN totaled $5.13 billion in
1994.

A bulk of the direct investments were from Japanese companies
which relocated their production facilities offshore to escape
from the rapid yen rise previously, Tan said.

He predicted that the "topside" for the US dollar could be
limited to 130 yen in 1997 unless the Japanese economy declined
further.

"The Japanese economy is already showing signs of recovery. At
the same time, I suspect the U.S. itself wouldn't want the
greenback to rise excessively from current levels against the yen
as it could lead to potential bilateral trade problems," he said.