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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: James F. Hopkins who wrote (23437)	8/6/1998 8:03:00 AM
From: Gary R. Owens	Respond to of 94695

ASIA MARKETS - Hong Kong dollar fears spread jitters SINGAPORE, Aug 6 (Reuters) - Renewed signs of a speculative attack on the Hong Kong dollar as the territory slides into recession and persistent fears China might devalue its yuan kept Asian markets on edge on Thursday. The weaker yen contributed to the overall state of gloom, though traders said the dollar looked capped around 145 yen ahead of Japanese Prime Minister Keizo Obuchi's financial policy speech to parliament on Friday. HONG KONG DOLLAR UNDER SIEGE The Hong Kong dollar came under intense pressure in both spot and forward markets amid talk of heavy U.S. dollar purchases by U.S. investment houses since Wednesday. The size of the activity was not confirmed but traders speculated that it amounted to billions of U.S. dollars in the spot market and hundreds of millions in the forward market. The Hong Kong Monetary Authority was seen buying the Hong Kong dollar, helping support it at the key 7.75 level on Wednesday, and dealers said the tug of war seemed to be continuing. The HKMA confirmed late on Wednesday that it had borrowed and bought Hong Kong dollars on behalf of the government treasury. It also said it was seeing quite a bit of short selling of the Hong Kong dollar spot and forward by overseas players, but attributed its own purchases to the treasury facing a seasonal shortage of funds. Traders said the selling could have been due to nervousness about the prospects of a Chinese yuan devaluation or a reassessment of Hong Kong's economic outlook. Forwards remained very well bid, with the six month rate quoted at 2,300/2,400 against 2,000/2,200 late on Wednesday. The overnight interbank rate also spiked up to around seven percent from 4.50 percent on Wednesday as funds sold the Hong Kong dollar spot and bought forwards at the longer end. This weighed on the stock market, along with the weaker yen and poor corporate results, and the blue chip Hang Seng Index ended at its lowest level since January 1995. CHINA STEPS IN -- AGAIN China's central bank was also in, propping up the yuan at the 8.28 level, its second intervention this week. Beijing has repeatedly said it won't devalue the yuan, but renewed weakness in the yen and worries about China's growth outlook following devastating floods have sparked fresh jitters. TAIWAN, KOREAN MARKETS SUFFER Elsewhere in north east Asia, the Taiwan dollar fell to two-month lows as worries about the Hong Kong dollar and Chinese yuan added to depressing economic forecasts. The government officially admitted that second quarter gross domestic product, due on August 14, may be a bit lower than recent estimates of 5.78 percent growth. The Korean won lost over five percent from late Wednesday levels, slithering through the 1,300 support as dollar sales for investment in local assets fell short of demand from banks building long dollar positions. Dealers said the state-run Korea Development Bank's buying of about $150 million, along with corporate dollar purchases for foreign debt repayment, also weighed on the won. Finance Minister Lee Kyu-sung said the government had no plans to use Korea's rising foreign reserves to repay overseas debt ahead of maturity. MALAYSIA TAKES ANOTHER RATINGS HIT Ratings agency Thomson Bankwatch lowered Malaysia's sovereign risk weighting to BBB from A-, following similar moves by Moody's and S&P, citing a sharper than expected economic slowdown. The ringgit was also affected by news that Bank Bumiputra, which has close links to the government, cut its base lending rates to 11.5 percent from 12 percent -- its second base rate cut this week. Bank Negara said its reserves rose to 57.78 billion ringgit at the end of July from 57.64 billion a fortnight earlier. BAHT, STOCKS HURT BY BANK PLAN DOUBTS The Thai baht drooped and stocks shed early gains as the Bank of Thailand sparked doubts about its proposal to guarantee major foreign investments in Thai banks. The central bank said a plan to guarantee the prices of bank shares bought by foreigners, announced on Wednesday, was only a policy option under consideration at this stage. Thailand had earlier said it planned to guarantee the prices that foreigners have paid for bank shares for five years after purchase in a bid to encourage foreign investment in the troubled sector. Thai banks need an estimated $13-$14 billion by 2000 to meet minimum capital adequacy ratios. STOCKS SAG DESPITE WALL ST REBOUND Most other stock markets finished lower as the glow from Wall Street's overnight recovery faded in a hurry. Hong Kong and Manila shares led the way, with losses of nearly three percent. The Philippine main stock index closed at its lowest level since April 1, 1993 as investor sentiment deteriorated. Singapore's Straits Times Industrials index stood out with a 1.3 percent gain, after media group Singapore Press Holdings announced it was proposing a capital reduction and distribution, returning S$1.22 a share in cash to shareholders under the exercise. biz.yahoo.com