Asia warned to take stock in midst of Euro rush
By GEOFF HISCOCK and ALAN WOOD
24nov98
EUROPE'S readiness for the Euro single currency regime, due to start on January 1, was called into question yesterday by Hong Kong Monetary Authority chief executive Joseph Yam.
Mr Yam, who last night delivered The Australian's Inside Asia lecture in Sydney, said the question for 1999 was whether Europe had done everything to put an efficient infrastructure in place.
This was a reference to financial management systems for the flow of money and information.
Even so, he said Asia should look at the European experience and think about increasing monetary co-ordination and stability in the region. This was not necessarily a single currency, but something that took account of the high level of intra-Asian trade.
"It is time to throw up these ideas," he said in an interview with The Australian yesterday. "It may be a non-starter because Asia is geographically fragmented and may lack the political will, but we need to consider this so we won't become a two-currency world of the Euro and the US dollar."
Mr Yam, the architect of Hong Kong's controversial $US15 billion ($23.4 billion) intervention in its stock market last August to deter speculators, said he saw Asia's economy bottoming in the first half of next year. But this depended on a range of external factors, including developments in the US, Europe, Brazil, Russia and Japan.
He foreshadowed a world where there was no room for small economies to be "loosely pegged" to another currency, such as the US dollar. Currencies either would be free-floating, as in Australia and New Zealand, or adopt the currency board model used by Hong Kong.
Mr Yam said China's Hong Kong autonomous region had the right system but needed to better explain its actions.
"There is no change to Hong Kong's way of business, no fundamental change to our philosophy. We are living through unusual times," he said.
Mr Yam said while the Hong Kong Government was showing a book profit of $US4 billion on its August share purchases, its intention was not to make a profit but to deter manipulation by the hedge funds.
"It's done. I didn't like it at the time. But if Hong Kong is pushed into controversial intervention, is there something wrong with the transparency, disclosure requirements and regulation of leveraged funds?" he asked.
A taskforce within the Hong Kong Monetary Authority had the job of suggesting possible reforms for the world's financial system "as soon as possible". The main forum was a coming meeting of the G22 group of developed and developing nations.
Mr Yam said the authority was looking at how best to manage Hong Kong's reserves. It might decide to hold some of its reserves permanently in blue-chip equities, although the current 15 per cent level for equities "may be too much".
Mr Yam rejected the view that the Government's intervention in August meant the Hong Kong share market was now too thinly traded.
"Turnover has gone up since our intervention. It is still liquid," he said.
theaustralian.com.au |
