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.