Asian Stocks Fall Over Indonesia’s Woes

Stocks stumbled across much of Asia on Monday amid worries that a dispute between Indonesia and the International Monetary Fund would derail a $43-billion rescue package for that nation’s battered economy.

But with shares barely changed in Japan and up in Europe, Wall Street received mixed signals for its return to trading today after taking a break Monday in observance of Presidents Day.

Early trading today was little help, with most of the Asian markets apparently recovering from Monday’s losses.

Investors’ concern about Asian stocks has increased again as Indonesia’s plans to adopt a fixed-rate currency system that could threaten its $43-billion bailout package from the International Monetary Fund.

Despite protests from the IMF, the United States and Germany, Indonesia said Monday it would push ahead with the fixed-rate system and called on the lending agency to come up with an alternative if it objected to the plan.

The plans by Indonesian President Suharto to adopt the fixed-rate system could further damage confidence in the world’s fourth-most populous country. It could also hurt global efforts to contain the financial crisis in Asia, analysts said.

Monday’s worst losses were in Singapore, where the main stock market index fell 4.6%. Malaysia and the Philippines each saw their key indexes fall 3.4%, while Thailand’s slipped 3.2%. In Hong Kong, another key market, the Hang Seng index was off 1.5%. By midday today, however, those markets were near where they started Monday morning.

Stocks also fell early Monday in Japan, with the Nikkei-225 stock index off as much as 190 points, but the index rallied to finish down just 15.49 points, or .09%, closing at 16,775.52. It was off slightly again this morning.

Indonesia’s stock index managed to gain 2% amid the turmoil, but its overall market was lower with declining issues outnumbering advancers by more than a 2-1 margin. That trend continued this morning.

Despite Monday’s losses, most Asian markets are up this year on hopes that the worst of the region’s crisis is over. So far in 1998, key indexes are up 14% in Indonesia, 11% in Malaysia, 10% in Japan and 8% in the Philippines. One exception is Singapore, which is down 3%.

Meanwhile, stocks in Britain and France soared Monday, buoyed by reports of a merger between two of Britain’s biggest banks.

Britain’s FTSE-100 index stocks jumped 37.6 points, or 0.7%, to 5,619.9, within 10 points of its record. Strength in the banking sector boosted the market after the Sunday Times reported Barclays was pursuing a merger with rival National Westminster Bank.

Rumors have circulated for months about the two banks merging, though most analysts say it would be difficult for regulators to approve such a deal. The banks declined to comment.

French shares also made robust gains, with the CAC-40 index rising 37.39 points, or 1.2%, to 3,225.12, boosted by demand for France Telecom and gains in energy stocks.

This was also just shy of the index’s record of 3,240 set last Wednesday. Fund manager Jean-Laurent Bruel at Quilvest said the climate was favorable for stocks.

“The market isn’t in an excessive phase. Interest rates are low and the dollar is holding up well. If we handle the crises in Iraq and Asia carefully, we should go higher as results come out,” he said.

On foreign exchange markets, the Indonesian rupiah fell against the dollar, dragging other Asian currencies down with it.

The rupiah fell to about 10,000 to the dollar by midday today.

The currency stood at 2,400 to the dollar in July.