SAR fallout adds to panic as region hits record lows

PUBLISHED : Thursday, 23 October, 1997, 12:00am
UPDATED : Thursday, 23 October, 1997, 12:00am

Fallout from the Hong Kong stock market slump and the deepening political crisis in Thailand spread through regional markets yesterday, with currencies and shares sliding to record lows.

Against the US dollar, the Thai baht moved close to 40 baht, the Malaysian ringgit touched a new low of M$3.43 and the Singapore dollar lost another 2 per cent to hit a 43-month low of S$1.5885.

In equities, the Malaysian, Philippine and Singaporean markets were hit harder as confidence continued to evaporate.

'There's a real panic about what is happening to the region as a whole,' Salomon Brothers chief regional economist Mark Sundberg said.

'You would not see such a reaction to fears over interest rates in the US if it were not for an erosion of confidence in the domestic markets.' US funds and merchant banks are said to have been aggressive sellers this week, including Morgan Stanley which recommends clients cut weighting in Asia to zero.

'Trust has pretty much evaporated from foreign investors,' Deutsche Morgan Grenfell chief investment officer for Asia-Pacific, Andre Ruppli, said.

'The same sort of people who jumped on the bandwagon in 1993 are now jumping out again on the way down.' The only bright spot yesterday was South Korea where stocks soared on news receivership would be sought for the financially troubled Kia Motors and Asia Motors.

Regional currencies were pummelled to fresh lows largely on fears Thailand's mounting political crisis would throttle prospects of an early economic recovery and concerns over possible impact on the region if the Hong Kong-US dollar peg were broken.

'If the Hong Kong dollar peg goes, it would have global implications. The Brazilian real would go, as would the Argentinian peso,' a currency analyst in Singapore said. 'Nothing on the face of this earth would be sacrosanct.' In Thailand, street protests demanding the resignation of Prime Minister Chavalit Yongchaiyudh entered a third day, as the baht tumbled to new lows of 39.80 baht on-shore and 39.90 baht off-shore.

It later recovered to 38.05 baht and 38.50 baht on market talk that a favourable candidate had agreed to accept the finance ministry portfolio following Thanong Bidaya's shock resignation at the weekend.

The ringgit felt the knock-on effect from Thailand's woes, coupled with lingering disappointment that Malaysia's 1998 Budget announced on Friday might not have been painful enough to tackle the country's economic woes.

It fell to M$3.43 to the US dollar before recovering to M$3.388, with Bank Negara checking its fall.

The Monetary Authority of Singapore was believed to have done the same with the Singapore dollar, which suffered from the regional contagion.

Dealers said the plunging Singapore stock market did not help the currency with the benchmark Straits Times Industrial Index shedding 2.23 per cent to a year-low of 1,731.68 points.

Brokers said talk of the Hong Kong dollar being under attack, problems in Thailand and Malaysia, and concerns over the Singapore property market dragged on sentiment.

In Indonesia, only central bank intervention pulled the rupiah back to 3,645 to the US dollar from a day-low of 3,700 rupiah as talks between the authorities and the International Monetary Fund continued.

Repeated central bank intervention was seen also in South Korea, eventually helping the won to close at 915 to the US dollar, up firmly from Tuesday's 924.4 close.

The Taiwan dollar closed firmer at NT$30.211 to the US dollar on profit-taking following its dramatic dive earlier in the week.

Taiwan stocks fell more than 2 per cent in response to gyrations in Hong Kong, before recovering near the close.