Uncertainty in RI a threat to gains in Asian countries
Uncertainty in RI a threat to gains in Asian countries
SINGAPORE (AFP): Asian financial markets are entering their eighth month of turmoil with significant gains on the road to recovery made last week already under threat from lingering uncertainty in Indonesia.
Currency and stock markets, some of which were closed half of last week for Chinese and Moslem holidays face a reaction from a slew of events in the region both positive and pessimistic to trading sentiment, analysts said.
"The markets will be trying to stomach a lot of news over the past few days. But I don't see any big rallies, just possibly a gradual strengthening," said Jacqueline Ong, regional analyst for British financial house I.D.E.A.
Last week's cheer came from two of the badly hit Asian economies under International Monetary Fund (IMF) stewardship.
South Korea on Thursday agreed with international creditors in New York to extend some US$24 billion of its short-term debts due this year to up to three-year loans, to be guaranteed by the South Korean government.
Thailand declared on Friday the abolition of the two-tier currency system, news that eclipsed the release of improved, although not-so-robust economic indicators.
"These markets (Thai and South Korea) are hoping they can decouple themselves from whatever that is happening in Indonesia," said David Cohen, an Asian markets analyst for Standard and Poor's MMS in Singapore.
"There's growing satisfaction with the government in Thailand and South Korea and I think the markets are inclined to reward them for that," Cohen told AFP.
But any spillover of positive sentiment on markets this week from developments in Thailand and South Korea are in danger of being engulfed by continued uncertainty in Indonesia.
Jakarta last week announced its non-bank private sector would seek a temporary halt to repayments estimated between $65 to $75 billion, to allow negotiations between foreign lenders and local borrowers.
Moody's credit ratings agency on Saturday viewed the move with pessimism, saying an officially-sanctioned default would conserve the dwindling stock of foreign currency resources available to the private sector.
"Moody's believes that there is a significantly greater risk that Indonesian private sector companies could default on their foreign currency obligations," it said.
Standard and Poor's had earlier lowered its ratings on five Indonesian banks, warning of deteriorating asset quality and the possibility that foreign creditors could be repaid in rupiahs rather than hard currency.
"The jury is still out on the (Indonesian) proposals. Indonesia remains the big question mark," Cohen said.
The threat of social unrest also remains as Indonesians began experiencing skyrocketing inflation of prices of basic goods.
"The worst hit will be the poor. It's inevitable and there seems to be no suggestion their suffering will be eliminated in the short-term," said Ong of I.D.E.A.
Since the crisis began in July up to last week's close in Singapore trade, the US dollar has appreciated enormously against Asian currencies, including a whopping 331.5 percent gain to 10,500 Indonesian rupiah.
The greenback has also risen 113.4 percent to 52.70 Thai baht, 75.5 percent to 4.4300 Malaysian ringgit, 61 percent to 42.43 Philippine pesos, and 21.4 percent to 1.7360 Singapore dollars.
Markets had witnessed last month the plunge to record lows by four of the Southeast Asian currencies, with the biggest fall posted by the Indonesian rupiah which touched at one point 16,500 to the dollar.
South Korea, one of the world's largest economies afflicted later on by the Southeast Asian malaise, has seen the US dollar appreciate by 76.3 percent from late October to 1,675 won last week.
South Korea's debt restructuring deal was cautiously welcomed by U.S.-based credit ratings agencies and investors as an important step in establishing stability in South Korea.
The deal was enough to send the South Korean stock market soaring by seven percent and the won appreciating to 1,600 to the US dollar on Friday.
In Bangkok, the government's announcement of the abolition of the two-tier system sent the Thai stock market rising sharply by 10.7 percent Friday and eased the baht's decline against the dollar.
"It's a sign of increasing confidence on the part of the Thais. They are prepared to take the steps now and the government is sending signals that it's doing what it's supposed to do," said Cohen.
The Philippines, which had been forced to delay its exit from three decades of International Monetary Fund supervision as the financial turmoil set in, also saw its stock market rise 8.4 percent on Friday, its biggest one-day rise in seven years.