To the thread: Asia Business News summary, Saturday, 21 February 1998
1. Currencies weaker on slim chance of G7 intervention - Asian stock markets stay firm: Asia's troubled currencies closed largely weaker after US Treasury Secretary Robert Rubin effectively ruled out concerted intervention by the G7 nations to stabilize regional unites, dealers said. Many of the big players, who unwound their long dollar positions on Thursday fearing the rich nations would jointly shore up the ailing regional currencies, came back to buy the greenback Friday, they said. Another factor that spurred demand for the US dollar, a safe haven currency, was the standoff between the US and Iraq amid fears it could result in a Washington-led military strike.
The closely-watched Indonesian rupiah ended at 9,000 against the US dollar from Thursday's close of 8,800, the Sing dollar at 1.6360 from 1.6320, the Philippine peso at 40.36 from 40.00 and the Taiwan dollar at 32.81 from 32.746. Despite the peso weakness, Philippine President Fidel Ramos said Friday he expected it to appreciate and stabilize at about 35 to the US dollar.
Asian-Pacific markets posted little movement Friday keeping an anxious eye on events in Indonesia and the Gulf as well as region's economic crisis. There was mixed trading, with Thailand posting the biggest gains where the market ended 2.2% up, but analysts said sentiment was cautious due to regional and domestic concerns. Jakarta managed to hold its own falling only 0.2%, after a 4.9% gain on Thursday on strengthening of the rupiah despite fears President Suharto will go ahead with plans to peg the currency to the US dollar. And Tokyo rallied in the final hour of trading as investors closed out their positions seeing no surprise in an economic package by the ruling party, brokers said. The key Nikkei stock average on the Tokyo Stock Exchange rose 139.76 points, or 0.8%, to end the session at 16,756.24. The broader Tpix index of all first section issues edged up 2.36 points to 1,260.69. Singapore stock prices ended 0.5% lower but dealers said the general market undertone was firm despite a drop in exports and warnings that earnings of local banks will fall by 30%. The benchmark Straits Times Industrials index of the Stock Exchange of Singapore fell 7.68 points to end at 1,545.79 while the broader All-Singapore index was down 3.08 points to 410.52. Australian share prices slipped 0.5% with uncertainty over Iraq and falls on the Japanese, Hong Kong and New York markets turning investors cautious.
2. European bourses set new highs - Greenspan ailing, will not attend G7 UK meet: Major European bourses closed at or near record levels on Friday as takeover bid speculation and historically low global interest rates continued to attract cash-rich institutional investors. Trading volumes were relatively light however, due to worries about rising tensions in the Gulf, a scarcity of fresh economic data and general caution ahead of this weekend's G7 economic meeting. But despite the uncertainties, bourses in London, Amsterdam and Madrid all ended at new closing peaks against a background of low interest rates, steady economic growth and benign inflationary pressures - an environment which usually makes shares attractive since they can potentially give a greater return than ordinary savings. In Madrid, blue chips index Ibex-35 soared nearly 2% or 159 points to a new record close of 8,516.78, with banking stocks Grupo Santander and Banco Espanol de Credito (Banesto) responsible for the lion's share of the advance. Leading Spanish bank Santander caught the financial community napping on Thursday when it launched a $4.1 billion bid the remaining half of its unit Banesto, Spain's fifth-largest bank - the latest move in a sector which is expected to see further consolidation throughout Europe in the run up to economic and monetary union next year.
Banking shares were also the focus in London, where the FTSE 100 ended 0.58% or 33 points firmer to a record closing level of 5,751.6. The FTSE's 12 banking stocks which account for one-fifth of the blue chip indices' total weighting, soared on Friday, led by HSBC Holdings Plc, up 90p to 17.82 pounds. Germany's 30-share DAX index closed 20.25 points or 0.44% higher at 4,602.65, within striking distance of its all-time best while in Paris the CAC-40 share index ended 12 points firmer to 3,262.5 only 35 points below its highest-ever level.
In the currency markets, the yen was under pressure after the long-awaited Japanese economic stimulus package, unveiled in Tokyo earlier, failed to convince investors that Japan's ailing economy would revive anytime soon. US economist Fred Bergsten said on Friday Japan's strategy of continually putting forward inadequate economic packages at some point would fail and there was a risk of a sharp fall in the yen as a result. In New York, the dollar rose against the yen but was stable against major European currencies Friday, with traders disappointed with Japan's economic plan. Around 1530 GMT, the dollar was at 127.40 yen up from 125.97 yen Thursday and at 1.8190 German marks up from 1.8160. Against other major currencies, the dollar was at 1.4665 Swiss francs down from 1.4667 Thursday, at 6.0987 French francs up from 6.0880 and at .06109 pounds sterling up from 0.6108.
3. Deputies reject key budget change - IMF boosts loans to Russia: Russia's opposition-led parliament on Friday first rejected changes to the 1998 draft budget sought by the reformist government and then failed to pass its own version. The fate of the bill is now unclear.
Meanwhile, the IMF announced Thursday it would grant Russia extra credits, extending a 3-year loan until the year 2000 and voicing confidence that the government's market reform could stay on track. The IMF will top up a $10 billion credit granted in March 1996, originally for 3 years, and extend it to the year 2000, IMF managing director Michel Camdessus announced after talks with President Boris Yeltsin.
4. Japan adopts rescue measures for crisis-hit Asian neighbours - Tokyo posts first deficit with Asia in eight years: Japan's government Friday gave final approval to a package of measures to help Asian neighbours reeling from the economic cirsis, including 300 billion yen $2.4 billion in loans via a government bank, Export-Import Bank of Japan, officials said. Loans will be used to support Japanese companies' investments in Asia, as well as to assist exporters in the region. The package also includes the flexible application of trade insurance, including a new emergency credit line of one billion dollars for Indonesia for a two-year term. A one billion credit line had already been established for Thailand. The package, originally compiled by the ruling Liberal Democratic Party after fact-finding mission to Singapore, Thailand, Indonesia and Hong Kong, paid particular attention to Indonesia. Indonesia, now in the grip of riots and soaring prices, is the largest target of Japan's foreign direct investment in Asia. It is also the Asian country most dependent on yen loans. Japan announced in January it would provide loans of 50 billion yen to Indonesia for the year from April to complement earlier loans of 20 billion yen. It has also pledged to provide five billion dollars as part of a rescue package under the IMF.
Japan suffered its first trade deficit with Asia in eight years in January while its surplus with the United States grew ever larger, pushing the month's overall surplus up to 381.5 billion yen (US$3.0 billion), the Finance Ministry said Thursday. Trade with Asian neighbours registered its first deficit since January 1990 as the region's financial crisis struck home, with exports to South Korea, Thailand and Indonesia hardest hit. Yet the politically sensitive trade surplus with the United States soared more than 65%. Key points in LDP stimulus package:
1. issue a special 300 billion yen loan to support trade in Asia, through the Export-Import Bank of Japan;
2. study the establishment of a common currency system for the Asia or the more active use of the yen currency;
3. promote the securitisation of real estate, in an effort to revive the maribund property sector;
4. ease building code regulations;
5. relax the rules on share buy-backs, to prop up the sluggish stock market;
6. allow firs to reassess the value of the land they own, to increase their capital on paper and encourage them to lend more;
7. give corporations more freedom in pension fund management;
8. study for possible implementation the US-style pension fund system, in which staff can choose whether to contribute to a pension plan and employers can choose whether to match their contributions;
9. speed up approval of new drugs;
10. revise listing requirements in the stock market;
11. abolish the limit of foreign ownership of cable television operators;
12. support the introduction of an electric highway toll system.
---continued.
Samira |
