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To: Bobby Yellin who wrote (17117)	9/1/1998 6:41:00 PM
From: goldsnow	Respond to of 116812

HSBC Securities sees China rate cut likely in Sept 09:04 a.m. Sep 01, 1998 Eastern HONG KONG, Sept 1 (Reuters) - China will cut interest rates soon to help pull the country out of a serious deflationary trend exacerbated by the depreciation of other Asian currencies, HSBC Securities' China economist said on Tuesday. ''I think we will see a cut of about 150 basis points in the next few weeks,'' Joe Zhang, head of China research at HSBC Securities Asia Ltd told reporters at a briefing. ''The Chinese government must cut interest rates just to chase the tail of deflation,'' Zhang said. Without a cut in lending rates, real interest rates or the real cost of borrowing, would rise to punishing levels, hurting economic growth. Zhang said he expected China's economy to grow by seven percent in 1998 and by 5-6 percent in 1999. ''What matters is real interest rates and with deflation likely to be seven percent in the next 12 months, real interest rates could be 15 percent,'' Zhang said. China's prime lending rate was currently about seven percent. The People's Bank of China, the central bank, last cut bank deposit rates on July 1. Deposit rates were cut by an average 0.49 percentage point and lending rates by an average 1.12 percentage points. This brought borrowing rates on loans of up to six months to 6.57 percent and on one-year loans to 6.93 percent. Lending rates for loans with terms of more than five year were cut to 8.01 percent. In all, China needed to cut rates by 400 to 500 basis points over the next 12 months, he said. ''The benchmark lending rate should be around two percent,'' Zhang said, adding deposit rates on 12-month term savings account would fall to one percent, he said. Over the next 12 months, the rate of deflation was forecast to exceed seven percent, Zhang said. ''This is not a bold call. The risk we face is that deflation will likely be far more severe than this,'' he said. China's producer price index had been in negative territory for the past two years and would stay down, because of imported deflation from the depreciation of southeast Asian currencies against the Chinese yuan, Zhang said. China's retail price index (RPI) slipped 3.2 percent year-on-year in July and the consumer price index fell 1.4 percent year-on-year, official figures showed. Food prices, which account for about half RPI, were still falling, despite the current floods, he said. The government was likely to destock or reduce purchases of grains since its reserves were equivalent to three years of consumption, far too high a level, Zhang said. ((Kathleen Kearney (852) 2843 6933; Fax (852) 2845 0636, hongkong.newsroom+reuters.com)) Copyright 1998 Reuters Limited.

To: Bobby Yellin who wrote (17117)	9/1/1998 6:48:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116812

Well Fed may wait ..than recession would hit even sooner... Dollar ends mixed as yen rallies broadly 06:19 p.m Sep 01, 1998 Eastern By Chris Stetkiewicz NEW YORK (Reuters) - The dollar ended lower against the Japanese yen Tuesday after Malaysian foreign exchange controls and a sharp rally in Tokyo stocks boosted many PacificRim currencies. The greenback slumped against European currencies in early trade but later bounced back as U.S. stocks powered higher and eased speculation that the Federal Reserve might soon lower official interest rates. The Malaysian ringgit rose 3.9 percent against the dollar after the Malaysian central bank halted offshore ringgit trading. Meanwhile, a rally in Japan's stock market, where the Nikkei 225-share index rose 1.86 percent, helped boost the yen broadly, dragging the Canadian and Australian dollars higher as well. Japanese investors continued to unload dollars to shore up their domestic equities portfolios, which have suffered under a sharp recent slide on the Nikkei, currency traders said. But the dollar rebounded somewhat from a 10-week low against the yen as investors, mindful of Japan's prolonged economic slump, bought the greenback on the cheap. ''You're seeing some capital repatriation to Japan and dollar position liquidation. But fundamentally, do you want to own yen? As an investor, no,'' said Seth Garrett, global head of spot currency trading at Credit Suisse First Boston. The Dow Jones industrial average rose 288.36 points, or 3.8 percent, erasing much of Monday's 6.4 percent loss. Equity market stability reduced the odds that the Fed would cut interest rates, which typically hurts the dollar, traders said. ''The dollar was sold recently on fears the Fed would cut rates in response to a global stock market crisis. We're not expecting that as much right now,'' said one dealer at a U.S. investment bank. The dollar ended lower at 136.32 yen from 140.04 yen at Monday's close. The dollar rose to 1.7503 German marks from 1.7472 marks and rose to 1.4425 Swiss francs from 1.4340 Swiss francs. The British pound fell to $1.6748 from $1.6805. The dollar fell to Canadian $1.5520 from Canadian $1.5700. The Australian dollar rose to $0.5820 from $0.5686/91. Copyright 1998 Reuters Limited