Asian crisis spreads to world markets, European SEs fall
AFP
January 9: For the fourth time in recent months the Asian crisis threatened to engulf world markets. In early trade markets across Europe fell sharply. In a repeat of the domino-effect the crisis led to a meltdown in the US markets on Thursday, which in turn saw European bourses opening sharply lower.In Asia, the crisis extended to the fourth day on Friday, with the Singapore stock market slumping by 7.4 per cent, Hong Kong by 3.9 per cent, Malaysia by 3 per cent, Indonesia 1.2 per cent, Thailand 2.9 per cent, Shanghai B 3.8 per cent, Phillipines 8.3 per cent, South Korea, 2.9 per cent. Singapore's benchmark index plunged 7.4 per cent Friday despite reduced pressure on Asian currencies amid signs of intensified US help in easing the turmoil in Indonesia and other parts of the region. "Some funds are getting very uncomfortable with the situation in Indonesia," a dealer with a foreign brokerage said. "Rather than wait and see, they are bailing out right now." Most Asian currencies recovered after US
President Bill Clinton telephoned Indonesian President Suharto and Singapore Prime Minister Goh Chok Tong to underscore American backing for efforts to improve the situation. Hong Kong share prices dived 4.8 per cent in opening trade due to higher inter-bank rates as Asia's currency crisis deepened, dealers said. The key Hang Seng index lost 1,785.93 points to close the week's trading at a more than two-year low of 8,894.64 on Friday - the sixth consecutive losing session since trading started for the new year. The slump, which followed a near 3 per cent loss the previous day, came amid fears of a rise in prime lending rates because of higher inter-bank interest rates in order to ward off speculative attacks on the Hong Kong dollar which is pegged to the US dollar at around 7.80. The Hong Kong Association of Banks decided Friday to raise the Prime leading rate by 0.75 percentage points to 10.25 per cent from 9.50 per cent starting Monday in order to alleviate pressure on interest margins. Hong Kong's
four leading banks -- Hongkong and Shanghai Banking Corp, Standard Chartered Bank, Hang Seng Bank and Bank of China, had also announced they would raise prime or best lending rates to 10.25 per cent from 9.50 per cent. It was the second such increase since the October stock market crash last year, when rates were raised from 8.75 per cent to 9.50 per cent. The move came amid higher inter-bank rates, which were raised to head off speculative attacks on the local currency amid the regional currency crisis. "It is a question of confidence, and we are just not seeing any encouraging signs in the region or any assurance," said Stephen So, senior manager futures trading at Sun Hung Kai Securities. Malaysian share prices closed three percent lower Friday in line with falls in regional markets as news of an unexpectedly large trade surplus in November failed to lift sentiment, dealers said. "The situation now is one of sheer panic (but) more so in Singapore and Indonesia than Malaysia," a senior analyst at a
local brokerage said. "At the rate the market is sliding now, it just doesn't make sense any more. I don't think there is going to be any let-up," the analyst said. "Everyone is reacting more severely than the situation actually warrants." While investors have realised that even safe havens such as Singapore and Hong Kong are no longer immune to the regional meltdown, he said a rebound in Singapore was now likely follow Friday's plunge of more than seven per cent. "If that happens, it should in some ways help stabilise the situation around the region," he added. An institutional sales manager said the tumbling Indonesian rupiah was having a particularly adverse impact on the Malaysian market. "As the rupiah just continues to crash, we are taking a direct hit. With each level that we sink to, the prospects of recovery get more and more bleak, " he said, "The crisis is reaching a head. Singapore and Hong Kong are not what they used to be to investors. There seems to be no safe havens ... confidence has
flown out faster than capital," he said. "Even the purest long term investor is getting out. It is nightmarish." LONDON: European stock markets fell sharply in early trading on Friday after a near 100-point drop on Wall Street and a plunge in markets across Asia. The FT-SE 100 index of leading shares in London was showing a loss of 65.2 points to 5,171.9 points. The decline was led by stocks traded in the United States and in Hong Kong. In Paris, the CAC-40 index was 21.64 points lower at 2,933.3, while in Frankfurt the DAX index fell by 78.24 points to 4,268.99 points. Prices were driven down by a fall of 99.65 points on the Dow Jones Industrial Average index, which closed at 7,802.62 overnight. Even sharper losses on the Asian markets, as investors stampeded to sell and pull out of the region, added to gloomy market sentiment across Europe. Oil stocks continued to suffer from extremely low crude prices, which late on Thursday fell below an 18 and a half year low point. Shares in the
Shell oil giant fell by 5.75 pence to 414.75 pence and British Petroleum (BP) stock fell by 8.5 pence to 781.5 pence.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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