Asia’s Markets Reopen on Shaky Ground
Markets across Asia suffered a serious case of the jitters early today, as traders moved to protect themselves from continued turmoil in Asian currency and equity markets.
At midday today, Hong Kong’s Hang Seng index was off 586.87 points, or 5.3%, at 10,557.47, Tokyo’s Nikkei-225 index was down 333.47 points, or 1.9%, at 17,030.27 and Sydney’s key index was off 84 points, or 3.3%, at 2,477.3.
Smaller Southeast Asian markets, including Singapore and Kuala Lumpur, showed a slight increase early in the day.
But the sharp tumble in Hong Kong share prices early today shattered hopes of an early recovery in other Asian markets, which were still reeling from the global slump that followed last Thursday’s plunge in the Hong Kong stock market.
Across Asia, stock markets reflected a high degree of anxiety about the impact of the regional economic turmoil on high-technology firms and banks heavily invested in Asia. The Australian dollar is under attack from speculators as a result of upheaval in gold prices and continued shakeout from last week’s market turmoil.
“It’s just getting worse and worse at the moment,” said Andrew McGill, a senior dealer at Chase Manhattan Bank Australia. “It’s starting to work its way up to North Asia and that would be bad news for Australia because we’ve got our biggest trading partners up there.”
The sell-off at the New York Stock Exchange on Thursday and Friday hit companies that do business in Asia especially hard and left the Dow Jones industrial average down more than 130 points. A rebound in Hong Kong’s Hang Seng index Friday failed to restore investor confidence.
The target of greatest anxiety today is Hong Kong, which is reeling from slumping property prices, shelved stock offerings and tighter credit. The main concern is the survival of the Hong Kong dollar’s peg to the U.S. dollar, and the high interest rates needed to defend it against speculative attack.
Across the globe, government officials urged calm. Chinese President Jiang Zemin, who arrived in Honolulu Sunday en route to a summit with President Clinton in Washington, told reporters before leaving China that investors should not lose their confidence in Asia.
“I completely believe that rational investors will not, because of changes in the stock market, lose their interest in the future economy of China and Hong Kong,” he said at a news conference.
In Washington, Treasury Secretary Robert Rubin pledged U.S. support for Southeast Asian economies but said the governments involved must take responsibility for resolving this fiscal crisis by establishing “sound policy regimes.”
Asked on ABC-TV’s “This Week” whether Washington would consider a reprise of its 1994 bailout of the Mexican peso, Rubin said: “That is not envisioned here. The key participants here will be the IMF [International Monetary Fund] and the World Bank.”
Officials said the IMF is also expected to complete “very soon” a package of aid measures aimed at restoring confidence in the battered Indonesian economy.
The “Mai Tai hangover,” as it has been dubbed, began in July when Thailand was forced to devalue its currency and the problem quickly spread to its neighbors in Southeast Asia.
The Hong Kong government moved over the weekend to protect the former British colony from further attacks on the Hong Kong dollar by currency speculators. Hong Kong officials see the peg as vital to safeguarding the world’s confidence in Hong Kong’s economic stability under Chinese sovereignty. Even though the strong currency hurts tourism and exports, big business seems to agree that the peg must stay.
On Saturday, Hong Kong monetary officials raised the key discount interest rate, making borrowing more expensive for banks that approach it for overnight funding.
