Search for scapegoats as hot money flees Asia

Search for scapegoats as hot money flees Asia

By Nick Cumming-Bruce

BANGKOK: Another bad day for the Thai baht Wednesday
threatened more turbulence for the currencies of its Southeast
Asian neighbors, just as their club of tiger nations is
celebrating its 30th anniversary by admitting two new members --
including the military-run Myanmar.

One result is certain to be more searching for foreign
scapegoats, notably George Soros, the Hungarian-born financier
and philanthropist who reportedly made several billion dollars as
the pound was ejected from the European exchange rate mechanism
five years ago.

Thailand's currency plunged 4 percent against the dollar
Wednesday, its steepest fall since July 2 when the government was
forced by a deepening financial crisis to float the baht. It
prompted renewed fears of a domino effect on currencies in the
region, with a resurgence of speculative attacks.

Thai banks' total outstanding debts amount to 800 billion baht
(US$27.2 billion) and the suspicion is that property companies
have defaulted on at least 40 percent of these. Thailand's stock
market shared the sentiments of currency markets Wednesday by
slumping 4.3 percent.

The baht's fall will further test the mechanisms and tactics
adopted by other Southeast Asian economies to prevent the feared
domino effect. Foreign investors are haunted by a repeat Mexico
where the plunging peso forced an international rescue operation
three years ago.

Malaysia's central bank revealed on Tuesday it had blown 12
percent of its reserves, or $3.4 billion, attempting to beat back
currency speculators but to little effect -- the ringgit still
dropped 3.1 percent. Financial analysts say it may only make
future interventions harder.

The Philippines, which experienced a 6 percent drop in the
peso, and Indonesia, where the rupiah lost 2.5 percent, widened
the band for trading their currencies. Even the once rock-solid
Singapore dollar has lost ground.

Malaysian prime minister Mahathir Mohamad put the blame for
the turmoil on a powerful American financier who, he implied,
wanted to punish ASEAN countries for their decision to admit
Myanmar.

Soros felt the need Wednesday to insist there was "absolutely
no connection" between his objections to Myanmar's rulers and the
volatile state of regional currency markets.

Mahathir's fears of conspiracy were only sharpened by the
currency fall at a time when Malaysia is still riding a boom that
has seen the economy grow at 8 percent a year for the past nine
years and is forecast by Malaysian economists to bound along at
8.9 percent next year.

Thai authorities appear even more prone to paranoia. A shocked
financial community is still mulling over police raids last week
on the offices of two foreign brokerage houses. Their mission: to
try to track down who was responsible for rumors overseas about
the imminent closure of five smaller banks.

Market analysts say the raids have only served to underline
the disarray among Thai political leaders and financial
authorities about how to cope with a crisis screaming for swift
action to implement long overdue reforms.

The International Monetary Fund's concerns over Thai
management of the crisis surfaced earlier this week when its
first deputy managing director, Stanley Fischer, warned of a
"prolonged period of slow growth" if authorities do not come up
with measures to rescue its finance sector.

Thai officials have consulted the IMF but have yet to make up
their minds whether to seek an IMF loan. Thai finance minister
Thanong Bidaya said Wednesday only that authorities were weighing
"secret options".

-- The Guardian