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SCMP Reporter

Amid the continued carnage on East Asian markets yesterday, pressure was mounting on the Group of Seven (G7) nations and leading multilateral financial institutions to take urgent action to restore confidence.

 Regional currencies fell dramatically around the region but news United States and Japanese monetary officials were planning to meet to discuss the US dollar's recent surge helped restore some of the early losses.

 The rupiah again led the free fall, tumbling another 18 per cent at one stage to touch 8,450 against the US dollar amid disappointment over the country's budget, but later recovered to 7,900.

 The ringgit temporarily touched an intra-day high of M$4.88 to the US dollar, while the Singapore dollar hit S$1.794 at one point, both prompting central bank intervention.

 Stock, commodity and oil markets were also savaged.

 'It's like quicksand,' Peregrine Brokerage research head Chia Yew Boon said.

 Financial experts are mooting three possible measures that could help haul the region's markets back from the abyss, all of which require a concerted global effort.

 Firstly, analysts have begun discussing a possible resurrection of the 1985 Plaza Accord, whereby the world's leading central banks band together to stop the US dollar from overheating through co-ordinated international intervention.

 This could involve not only the central banks of the G7 countries, but also the five main Asian central banks of Hong Kong, China, Japan, Singapore and Taiwan.

 Standard & Poor's MMS International general manager Andy Tan said: 'The key question here is confidence. Concerted joint intervention has worked in the past.'  The US and Japan monetary authorities are expected to discuss ways of propping up the sagging yen this week.

 Secondly, there are calls for the introduction of Brady bonds as were used to bailout South America. Southeast Asian governments' bank debts could be re-packaged, secured by US Treasuries or some equivalent, and resold in a more attractive form with guarantors.

 A third option is to hold roundtable talks with bankers and governments to set out a concerted programme for corporate and government debt rescheduling.

 Against this backdrop countries would still be expected to carry out economic reforms and austerity plans to get their economic fundamentals back in order, where necessary with the International Monetary Fund's help.

 Morgan Stanley (Asia) regional economist Tim Condon said: 'I don't think this is primarily a debt repayment problem, rather an evaporation in domestic confidence in monetary stability in countries like Indonesia, Thailand and Malaysia.'  Daiwa International Capital Management strategist Peter Perkins said: 'We're going to have to see a more aggressive approach on behalf of the US Treasury and IMF.'  The collapse of the rupiah is seen as the most immediate problem, as it is dragging other currencies down and adding to the region-wide corporate scramble for US dollars.

 ANZ Investment Bank head of Asian markets research Danial Lian said: 'I believe very aggressive US dollar hoarding and capital flight could buoy the rupiah to 9,000-10,000 in the near-term.

 'Rather than see corporates default individually, the Indonesian Government could declare a debt moratorium so they could stop US dollar demand and at least preserve the real economy.

 'I believe Indonesia is already technically in default but a declaration by international bankers might not be forthcoming till later in the first quarter.'  Dresdner Kleinwort Benson regional economist Geoff Lewis said: 'If the currency stays at anything like these levels well into 1998 everyone's going to be wrong even on their lower growth forecasts for Indonesia.

 'Gross domestic product growth could be 2-3 per cent or even lower. If the rupiah continues to weaken throughout the year we could see no growth at all.'  Both the Singapore and Malaysian monetary authorities went on the offensive yesterday.

 Making his first public statement since taking office, Monetary Authority of Singapore (MAS) managing director Koh Yong Guan said: 'The MAS stands ready to act decisively against any speculative attack on the Singapore dollar.'  In Kuala Lumpur, Finance Minister Anwar Ibrahim confirmed Bank Negara's intervention.

 The central bank said its total outstanding external debt was 30 per cent, lower than the 56 per cent claimed by the Bank for International Settlements earlier this week which spooked the market. It said the country's total foreign debt amounted to US$45.2 billion, or 42 per cent of GDP.



Global help needed to support currencies