To Ike and the thread - Summary of today's Asian Business headline news:
1. Europe's bourses ignore Asia, rally strongly, dollar edges up - Yen weakened by Indonesian economic problems: Key European bourses shrugged of the latest bout of Asian jitters to close near record levels on Monday, while the dollar rose against th yen on concern over expected measures to revive Japan's economy. Although trade was muted by a US market holiday, Britain's FTSE 100 blue chip shares index ended 0.70 per cent up at 5619.9; bid and merger talk in the banking sector provided the main impetus, with talk of a linkup between the two British giants, Barclays and Natwest. French shares also made robust gains buoyed by the firm dollar. The CAC-40 index closed up 1.17 per cent at 3225.12 boosted by demand for France Telecom and gains in energy stocks which were supported by Iraq tensions.
The yen weakened on Monday on the London forex market, pulled down by Southeast Asian currencies as investors worried about the deterioration of the situation in Indonesia. Dealers said the yen was likely to remain weak near-term because of perceptions that a package of economic stimulus measures, due to be announced on Friday, would do little to boost Japan's flagging economy. Traders said the yen was undermined by renewed weakness in southeast Asian currencies, triggered by Indonesia's plans to set up a currency board despite opposition by the IMF.
Key Asian share markets were hit, with the Hang Seng down 1.5 per cent and Singapore's Straits Time index losing more than 4%. In Germany, concern over the decline in Asia dampened sentiment more than elsewhere. The electronic Xetra DAX index ended up 0.29% at 4535.56 after a day of rangebound trading with volumes thin due to the closure of Wall Street for President's Day.
2. Indonesia drags down Asian stocks - Currencies swayed by slithering rupiah: Asian currencies suffered from the Indonesian rupiah's whims on Monday in the face of growing international resistance to Jakarta's plans to adopt a currency board system
The rupiah pulled off its early low of 10,800 to the dollar following persistent dollar sales by US investment banks around the 10,500 level, seen as position squaring due to a holiday in US markets. But dealers said its outlook remained bleak against a backdrop of growing social unrest, worries about the probable selection of controversial minister Jusuf Habibie as vice president and mounting international criticism of a proposal to peg the rupiah to the dollar.
Other Southeast Asian currencies were hit by the rupiah's early drop but their falls were more muted and dealers said they were beginning to show resilience to the rupiah's fortunes. Thai baht recovered from a low of 48 to the dollar despite FM Tarrin Nimmanahaeminda saying Indonesia's adoption of a currency board could complicate Thailand's economic recovery efforts. Infected by the rupiah, Singapore dollar fell sharply to 1.6790 from its close on Friday at 1.6500 per US dollar, the Malaysian ringgit to 3.90000 from 3.720, the Thai Baht to 47.2 from 46.10 and the Philippine Peso to 40.80 from 40.35. Jitters were felt farther north. The Taiwan dollar closed weaker at 32.858 from 32.820 and the South Korean won eased to 1.659 from 1.620.
3. Japan parliament enacts rescue bills as PM to stimulate economy: Scandal ensnares two more banks: Japan's parliament on Monday enacted two key bills to use 30 trillion yen ($240 billion) of public money to help revitalise the ailing banking sector, parliamentary officials said. Enactment of the two bills paves the way for the use of public funds to boost banks' capital and provide support for the thorough protection of depositors if banks fail. One of the bills allocates up to 17 trillion yen to expand the functions of the state-backed Deposit Insurance Corp for the full protection of depositors.
Two more of Japan's big banks were implicated on Monday in a widening bribery scandal involving officials at the powerful Ministry of Finance. Tokyo prosecutors issued fresh arrest warrants against two ministry inspectors, who are already in police custody, on suspicion that they accepted lavish entertainment from Sumitomo Bank and the Bank of Tokyo-Mitsubishi (BTM) in exchange for confidential information. The issue of the warrants meant that six of Japan's ten major city banks have now been implicated in the scandal.
4. Japan's FM faces pressure at G-7 to show Asia leadership - Tokyo must lead Asia out of crisis: Daley.
5. Indonesia 'goes ahead' with fixed currency plan - Govt, IMF to discuss issue: Indonesia said on Monday it was pushing ahead towards a fixed exchange rate system, calling on the IMF to come up with an alternative for strengthening the rupiah currency if it objected to the plan.
Meanwhile, controversial Research and Technology Minister Jusuf Habibie, who has been implicitly criticized by the IMF, appeared set to become Indonesia's new vice-president next month.
The Jakarta stock index rose 2.13% to 457.71 points on the back of gains in government-controlled stocks, but sentiment was generally weak.
6. Seoul issues more bonds, cracks whip on employers: South Korea on Monday scrambled to head off a new financial crisis and cracked down hard on employers with arrest warrants in a warning shot to prevent abuse of new laws allowing mass layoffs.
Passage of the layoff law, one of the conditions demanded by the IMF for $57 billion bailout in December, was almost derailed by threats of strikes by South Korea's tough unions.
7. Turbulence slashes air passenger forecasts: Asia's economic crisis has forced airlines to slash regional forecasts for international travel in 2001 by more than 30 million passengers. The International Air Transport Association (IATA) cut its forecast for Asia-Pacific passenger numbers in 2001 to 176 million passengers from the 207 million expected before, said IATA director general Pierre Jeanniot. Asia-Pacific traffic had also been forecast to increase from 35% of world aviation in 1995 to about 50% in 2010 but was now expected to ease to 33% in the same period. Jeanniot called for airlines to simply avoid entering price wars, reduce capacity where needed, improve coordination through such measures as code-sharing and take the opportunity to purchase new, more fuel-efficient aircraft. The IATA chief said he was also urging Asian-Pacific governments to agree to a three-year moratorium on price increases for infrastructure, such as landing and traffic control fees.
8. Oil market - Prices flat as glut dampens Iraqi tension: Oil prices were flat on Monday as Middle East tension again failed to take the weight off a huge global oil glut. Crumbling Asian oil demand, too much supply and brimming oil storage tanks have sliced a third off prices over the past four months, sending prices to near four year-lows. But despite those losses and the chance of a military strike against Iraq traders said the market was still in a bearish mood. Brent crude, the world benchmark grade, was down 3 cents at $14.82 at 1110 GMT in London.
Oversupply and poor demand appeared to be calming oil market fears that military action against Iraq could lead to Baghdad cutting oil exports under its "oil-for-food" with the United Nations. Baghdad is currently exporting 1.25 million barrels of oil each day. If that supply was cut off it would bring the market into balance and add about $1.50 a barrel to oil prices, traders said.
9. Market looks up - Russia Central Bank to slash 2 key rates: Russia's Central Bank said Monday it would lower two key rates from Tuesday following a marked improvement in financial markets here. In a statement the Bank said it was trimming its refinancing rate and its 30-day Lombard rate, both by three points to 39%, in response to "positive changes in the financial markets," Interfax said. The Bank hiked its refinancing rate from 28% to 42% on February 2 in a bid to defend the ruble's value amid a flight to the dollar which had threatened to destabilise the Russian currency.
By changing the refinancing rate - at which the Central Bank repurchases government securities - the Bank was realigning its rates more closely to the market rate for treasury bonds. Raising demand for government bonds - which play a key role in plugging the gap in Russia's shaky finances - increases demand for rubles, which are needed to purchase them, and thus strengthens the currency. Russia, last year one of the world's most bullish emerging markets, has been hit hard since the Asian financial crisis erupted in October, unsettling the stock market and causing large losses among leading Russian banks.
Hope these daily posts are helpful.
Regards,
Samira |
