U.S. keeps close eye on SE Asia developments

U.S. keeps close eye on SE Asia developments

WASHINGTON (Reuters): The United States is keeping a close eye on the financial crisis in Southeast Asia and senior administration officials said on Thursday they were in constant touch with authorities throughout the region.

A 10.41 percent plunge in Hong Kong stocks, which sent shockwaves through global financial markets, is the latest in a series of Asian financial crises worrying U.S. policymakers.

"We obviously have been focused on financial issues in Southeast Asia for many, many months now and we remain focused on those issues," U.S. Treasury Secretary Robert Rubin said after giving a speech at the U.S. Chamber of Commerce.

"We have been in touch with the relevant authorities in various countries, and financial institutions, and will remain so," he told reporters.

The Dow Jones industrial average index of key U.S. stocks ended the day down 186.88 points, or 2.33 percent, at 7,847.77 points. U.S. bonds gained from the turmoil as international investors sought a safe haven for their money. The benchmark 30- year Treasury bond was up almost a point and a half at 100-27/32 to yield 6.31 percent in late trading.

The worst-ever point-drop in Hong Kong stocks also sent warning bells ringing at the U.S. Federal Reserve.

"We have no comment, except to say that we are monitoring it," spokesman Joseph Coyne told Reuters in a rare statement. Fed officials usually try to avoid references to daily moves in financial markets for fear of unsettling investors.

Analysts said the Asian crisis may make the Fed a bit more hesitant to boost U.S. interest rates. They said cheaper Asian currencies could reduce U.S. import prices, thus keeping a lid on inflation. A weakening of the economies of America's key trading partners also could slow down the economic expansion in the United States, reducing the chances of overheating.

International financial institutions leapt to the defense of the Hong Kong authorities, stressing the strength of the economy and its ability to fight off speculative attacks.

"The IMF has confidence that the Hong Kong authorities will be able to withstand the assault from speculators," an official at the International Monetary Fund (IMF) said. "They are tough and sophisticated and they know what to do to stand the course."

U.S. administration officials seized the opportunity of Hong Kong's financial woes to reiterate their gospel that only sound macroeconomic policies can ensure sustained economic growth and stable financial markets.

"Over time, markets follow fundamentals and the key, for all sorts of reasons, is to get fundamentals right," Rubin said.

The Treasury chief has repeatedly lobbied governments in Southeast Asia to strengthen their financial systems, open themselves to world markets and improve regulatory oversight to help prevent financial turmoil.

Asked about the possible impact of Asia's troubles on the U.S. stock market, the Treasury chief replied: "I think the key for us is to do exactly what we have been doing for the last five years, to focus on the fundamentals."

"As long as we get our fundamentals right, the United States will be just fine," he added. Rubin declined to comment directly on the level of U.S. stocks.

A spokesman for President Bill Clinton added the United States was satisfied with international efforts, triggered by the Mexico financial crisis of 1994-95, that had led to an adequate international financial surveillance system.

The turmoil in Hong Kong is the latest economic setback for the Southeast Asian region. The collapse of the Thai baht in July triggered currency devaluations in several countries, and three -- Thailand, the Philippines and Indonesia -- were forced to seek IMF support.