Asian Stocks, Currencies Sink Deeper in Early Trading

Wall Street will be bracing for a new round of tumult today, on the heels of another deep decline in Asian stocks and currencies overnight.

With Friday’s 222.20-point plunge in the Dow Jones industrial average fresh in investors’ minds--and with fourth-quarter corporate earnings reports due in droves this week--the market would have enough to worry about even without more turmoil in Asia.

But more turmoil is exactly what Asia got today, as markets there opened sharply lower despite stepped-up Western efforts to restore stability and confidence in the region.

Stock prices plummeted in Hong Kong, Taipei, Singapore, Manila and Kuala Lumpur as trading opened:

* At midmorning the Hong Kong Hang Seng index was down 680.08 points, or 7.7%, to 8,214.56, while Singapore’s Straits Times index was off 68.30 points, or 5.8%, to 1,108.05.

* In Taipei the market’s key index lost 281.81 points, or 3.6%, to 7,455.39 by midmorning.

* The main Manila stock index was off 1.5% to 1,495.31, and Kuala Lumpur’s chief index fell 1.8% to 482.96.

Among the few bright spots: South Korea’s stock market rallied, with the main index up 10.47 points, or 2.4%, to 451.25 at midday.

In South Korea, International Monetary Fund Managing Director Michel Camdessus said he’s happy with South Korea’s implementation of conditions attached to a record $60-billion bailout program.

But in currency trading today, the Indonesian rupiah, Malaysian ringgit and Thai baht all continued to sink, despite the presence of other IMF and Clinton administration officials in the region in an attempt to demonstrate the West’s commitment to halting East Asia’s downward economic spiral.

The fresh attacks on Hong Kong and Singapore shares, in particular, unnerved investors in Tokyo, sending the Nikkei-225 index down 189.61 points, or 1.3%, to 14,805.49 in early trading today.

Hong Kong had successfully defended the value of its currency in October, but the deepening market and economic gloom across Asia apparently is causing Hong Kong investors to question how long asset values in the former British colony--now part of China--can hold up.

The Hang Seng index plunged late last week as Indonesia’s currency collapsed, triggering panicked food hoarding in some Indonesian cities.

The Hong Kong dollar is pegged at about 7.80 to its U.S. counterpart. For every 7.80 Hong Kong dollars printed, one U.S. dollar is set aside in a special fund that the government can then use to buy the local currency should it start to weaken.

So far, the Hong Kong dollar has held its ground, though interest rates are rising because investors are demanding higher returns to hold the currency.

Hong Kong banks were expected today to lift their best lending rates to 10.25% from 9.5% today, striking another blow to Hong Kong’s slumping property market and driving up costs for companies and consumers.

Hong Kong can “take the blows,” Financial Secretary Donald Tsang told reporters Saturday.

Anson Chan, the most senior civil servant, called for “steady nerves, a cool head and prudence” as she left for the U.S. and Canada to promote the territory. She is due in Los Angeles early this week.

The Hong Kong market’s slide today was fueled in part by reports that Peregrine Investment Holdings Ltd. is on the verge of liquidation.

The Hong Kong investment bank was all but shuttered by regulators on Friday after a plan to sell almost a third of the firm collapsed, leaving its solvency in doubt. The firm, one of Asia’s largest investment banks outside Japan and last year the No. 1 underwriter of Asian stocks, lost money on loans to an Indonesian taxi company following the plunge in the rupiah.

Today’s South China Morning Post reported that the firm is on the verge of liquidation after talks with potential suitors failed over the weekend. The paper cited Peregrine executives.

If Peregrine is shut down, it would sell its stock and bond holdings into an already slumping market. What’s more, some investors might worry that other banks or securities firms would be left exposed.

“It’s only Monday morning, but this week already seems like the longest, toughest week ever,” said Johan Tellvik, sales director at Caspian Securities in Hong Kong.

For Wall Street, the continuing decline in Asian markets has one silver lining: Investors are flocking to U.S. Treasury bonds as a safe haven, driving interest rates sharply lower.

But that isn’t helping the stock market, where the Dow Jones index last week lost 4.8%, to 7,580.42--its biggest weekly drop since mid-October 1989.

This week, fourth-quarter corporate earnings reports will provide much of the news on Wall Street, other than what occurs in Asia. If those earnings reports are stronger than expected, they could help support stock prices. But too many weaker-than-expected reports could trigger a new round of heavy selling, analysts warn.

* ENVOYS TO INDONESIA: The U.S. sent a team of senior officials to meet with President Suharto. A1