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To: Lee who wrote (29070)	2/2/1998 1:00:00 PM
From: Mohan Marette	Read Replies (1) \| Respond to of 176387

OT:Key word-'back of the envelope calculations' OT: Lee great link, but the key word that stuck in my mind from the article was back of the envelope calculations.Funny Moody and S&P with their inside the envelope calculations couldn't figure out what hit them when the Asian Flu suddenly made its presense known to them,remember they were predicting 7-8% GDP growth for the Tiger economies in 98!. Somehow it seems,all these economies are interconnected much more than we think Following is an article from a Korean News Paper. Hope I don't bore you with this. ------------------------------------------------------------------- Indonesian Crisis Revives Fear of Financial Meltdown in Korea 02/02 16:09 The looming financial crisis in Indonesia is reviving the specter of a financial meltdown in Korea, sending shivers through the country's financial markets. Press reports say a number of Indonesian financial institutions are now in a state of near defaults on external debts and some analysts say the Indonesian government is expected to call a moratorium on its private-sector debt sooner or later. Indonesia's debt defaults would become a nightmare for Korean financial institutions, which heaved a sigh of relief at a debt restructuring agreement struck last week in New York. The Korea Development Bank warned against the revival of a foreign-exchange crisis in Korea, noting that Indonesia's moratorium on debts would leave Korean financial institutions and companies unable to call in loans from their Indonesian counterparts. According to a report released by the state-run bank, domestic commercial bank and merchant banks invested $3.4 billion and $1.56 billion in Indonesia, respectively, as of the end of March last year. Investment by Korean businesses in the Southeast Asian country was tallied at $1.06 billion at the end of 1996, bringing the total of Korean investment to more than $6 billion. The declaration of a moratorium would make it all but impossible to collect principal and interest on loans or investment extended to Indonesian businesses which would cause Korean lenders to suffer a sharp rise in troubled loans. The bad loans must be covered by loan loss reserves and the credit squeeze on the part of Korean financial institutions would become all the more tight. Banking analysts say Korea's debt exposure to Indonesia is far greater than what is officially known. A number of Korean merchant banks have raised short-term funds in Singapore and Hong Kong and relent them to Indonesian banks and business concerns in search of high yields. In particular, Korean companies have engaged in offshore financing broadly, investing in junk bonds and derivatives issued by Indonesian financial institutions. Some analysts even put the amount of Korea's debt exposure to Indonesia at more than $10 billion, which would be comparable to Japan's. Fears are also mounting that Indonesia's debt defaults might hurt Korea's strenuous bid to reinvigorate exports. In 1996, Korea's exports to Indonesia amounted to $3.2 billion while imports from the country totaled about $2.3 billion. During the first 11 months of 1997, Korean exports to Indonesia reached $3.3 billion. Trading analysts say imports from Indonesia will be hardly affected by the moratorium call because imports of crude oil and liquefied natural gas are possible under barter trade. To be sure, exports to Indonesia will be undermined significantly since most of Korea's export items comprise finished and intermediary goods, which could be trimmed in parallel with economic sluggishness. Even before the declaration of a moratorium, Indonesia's financial crisis has been taking its toll on the Korean economy. A joint-venture national car project in Indonesia undertaken by Kia Motors Corp. is hitting a snag in accordance with the Indonesian government's compliance with IMF-imposed economic reform measures. Economists express fear about the possible contagion effect from Indonesia's call for a moratorium on its external debts. If Indonesian banks and businesses declared debt defaults, scared foreign investors might scurry to pull out of Korea, which would in turn revive the foreign-exchange crisis in Korea.