Business life: My finance news blog

Ten years after Indonesia, South Korea and Thailand were bailed out by the International Monetary Fund, their stocks and currencies are again under siege. This time, analysts say, they are strong enough to stand alone.

The MSCI Asia Pacific Index fell 7.5 percent today for a 42 percent decline this year. Indonesia halted stock trading after the benchmark index tumbled 10 percent. South Korea's won slid 4.8 percent to the lowest since 1997, when the nation took out a $57 billion loan from the IMF to meet overseas debt payments.

“None of the economies are likely to experience the same kind of downturn to the same degree that you saw during the Asian crisis,'' said Duncan Wooldridge, a Hong Kong-based economist at UBS AG, citing the region's foreign-currency holdings and absence of “huge'' current-account deficits.

The Asian financial crisis, set off in 1997 by plunging currencies, forced government to raise interest rates to limit capital outflows and caused companies to buckle under billions of dollars of debt. The region has since accumulated more than $3 trillion of reserves, more than half of the global total.

Today's market rout wasn't confined to countries pummeled in 1997. Japan's Nikkei 225 Stock Average fell 9.4 percent, the sharpest drop in two decades. Australia's dollar declined 7.4 percent against the U.S. currency.

`Recession-Like' Growth

Asia faces “recession-like'' growth in 2009 because slumping stocks will depress business and consumer spending, already being hurt by a drop in exports to the U.S., Europe and Japan, Wooldridge said. UBS yesterday cut its growth forecast for Asia excluding Japan to 6.1 percent from 6.9 percent.

Indonesia's stock exchange halted trading for the first time in eight years after the benchmark index plunged 10 percent, the biggest decline since 1998.

“We need to give enough time to the market to digest information rationally,'' Ahmad Fuad Rahmany, chairman of Indonesia's capital market regulator, said in a mobile-phone text message. “It's justified for us to suspend'' trading if the index falls more than 20 percent in just three days, he said.

Indonesia's currency fell 1.4 percent against the dollar today, taking its drop this month to 4.1 percent.

The rush to sell stocks comes amid relatively buoyant economic growth. Indonesia's gross domestic product unexpectedly accelerated to 6.4 percent in the second quarter as rising prices and demand for the nation's coal, palm oil and rubber pushed exports to a record. Growth will probably cool as commodity prices recede.

`Nobody Is Immune'

“Indonesia is simply buffeted by external forces to which nobody is immune at a time when global liquidity is drying up and risk aversion is increasing,'' Agost Benard, associate director at Standard & Poor's in Singapore, said in an interview with Bloomberg Television yesterday (pay day loans).

In Thailand, the SET Index fell 6.9 percent to the lowest since 1993. The growth outlook in Asia's second-largest economy is worsening after protesters vowed to step up efforts to oust the government following violent clashes with police yesterday.

The Thai central bank kept interest rates at a 16-month high of 3.75 percent after two increases since July. The baht, Asia's third-worst performing currency this year, fell 0.2 percent to 34.54 per dollar at of 2:42 p.m. in Bangkok. The currency is close to its lowest level since February 2007.

Thailand's banks have enough capital to withstand the world credit crisis, said Vincent Milton, managing director of Fitch Ratings in Bangkok.

“You don't have the structural imbalances'' of 1997, Milton said. “The capital position of most Thai banks is stronger than lenders anywhere, because they are risk averse and moderate economic growth means there's been no run up on the loan books.''

Won's Slide

South Korea's currency slid to the lowest in a decade today as a seizure in global credit markets forced banks and companies to sell the currency to meet their dollar-financing requirements.

The slump has been exacerbated by a global shortage of dollars and by South Korea's current-account deficit, according to Goohoon Kwon, economist at Goldman Sachs Group Inc. in Seoul.

“Korea is the only major country in the region with a current-account deficit, so there's no money coming in,'' Kwon said. The shortfall stands at about 1.5 percent of gross domestic product, down from 3 percent during the financial crisis.

The deficit could change to a surplus “very quickly'' as the drop in oil prices shaves the import bill, Kwon said. A 10 percent decline in crude would lower the deficit, which was a record $4.7 billion in August, by about $1 billion a month, he said.

South Korea has said it is willing to use the nation's foreign-exchange reserves to ease the currency shortage. South Korea has accumulated $243.2 billion in foreign reserves. They plunged to $7.3 billion in November 1997 as the government made an unsuccessful attempt to prop up the won.

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