Speculative trading boosts JSX shares

Speculative trading boosts JSX shares

HONG KONG (Reuters): Political risk dominated Asia's smaller asset markets on Tuesday, feeding a speculative equity rally in Indonesia but sending Thai stocks sprawling, while takeover talks lifted Seoul stocks to an eight-month high.

Jakarta shares chalked up a fourth straight session of gains on hopes that an anticipated impeachment and removal from office of President Abdurrahman Wahid would be positive, making the market Asia's best performer over the past week.

Jakarta stocks hit an 11-week high as investors snapped up stocks from almost any sector on the eve of a parliamentary debate on the future of President Wahid, speculating that the prospect of a change in leadership would boost markets.

The Jakarta Composite Index jumped 3.5 percent on heavy turnover of 1.02 trillion rupiah ($91 million).

Dealers said trading was mostly by local players who speculated that parliament would push for a special session to impeach the struggling Wahid.

The Indonesian parliament has censured Wahid twice over two financial scandals. But attorney-general Marzuki Darusman on Monday cleared him of any wrongdoing.

But Thai stocks stumbled down 2.5 percent after Prime Minister Thaksin Shinawatra, backed by his cabinet, fired Bank of Thailand governor Chatu Mongol Sonakul after he refused to bow to government demands for the central bank to change its policy of holding interest rates at extremely low levels.

Japan's key Nikkei 225 closed 0.26 percent higher to snap a five-day losing streak after a rebound in battered banking issues such as Sumitomo Mitsui Banking Corp.

The euro slipped against the yen on concerns about the European economy. The Japanese currency seesawed against the dollar at around 121 yen in thin trade following market holidays in the United States and Europe.

Thailand's government fired central bank governor Chatu Mongol Sonakul after a public row over monetary policy, spooking the stock market but boosting the baht on expectations of higher interest rates.

A government spokesman told reporters the new central bank chief would be Pridiyathorn Devakula, president of Thailand's Import-Export Bank and a leading supporter of the argument that higher rates are needed to kick-start the economy.

Chatu Mongol was well respected in international financial circles and analysts say his abrupt sacking raises doubts over central bank independence.

Many analysts say higher rates may well do the flagging economy more harm than good with individual banks themselves at particular risk because of the government's stated desire to see deposit rates hiked.

The Thai banking sub-index ended down 4.6 percent.

South Korea's benchmark stock index jumped 2.2 percent to finish at a new closing high for the year as mounting hopes for a potential General Motors takeover of beleaguered Daewoo Motor fired-up auto parts makers.

GM's announcement it had agreed to begin formal negotiations to acquire bankrupt Daewoo Motor pulled the market up further in late trade.

The Korea Composite Stock Price Index (KOSPI) marked its highest finish since September 15, 2000.