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Asia moves to calm battered markets
Publication Date : 22-08-2013
Asian governments are moving to address concerns over economic and currency weaknesses that have contributed to the current selldown in regional markets.
Policymakers in India, Indonesia, Malaysia and Thailand - whose economies are among the worst hit by slowing exports and current account imbalances - took steps to stabilise markets.
Indonesian President Susilo Bambang Yudhoyono said after an Indonesian Cabinet meeting yesterday that Jakarta would announce a policy package tomorrow to fight slowing growth and inflation. Its central bank will also step in to stabilise the rupiah, which fell to a fresh four-year low yesterday.
Indonesia's biggest pension fund, PT Jamsostek, said it will mop up battered blue chips, which have fallen at the fastest pace worldwide this quarter.
As a result, Indonesian shares rallied 1 per cent for their first rise in five days.
In India, the central bank said it would pump 80 billion rupees (US$1.2 billion) into markets - the latest in a series of moves to halt the rupee's slide.
The news sparked a rally in Mumbai, but it fizzled out and shares fell nearly 2 per cent to close at an 11-month low. The rupee, meanwhile, sank to a new record low against the greenback.
Malaysia yesterday was quick to assure that the economy would continue running a current account surplus and could cope with the volatile capital flows.
But it cut its tip for full-year growth after a disappointing second-quarter expansion. Kuala Lumpur closed flat ahead of the data, but the ringgit still weakened near a three-year low.
Thailand's central bank also chose not to hike interest rates yesterday, putting growth worries over rising debt fears. Bangkok shed 1.2 per cent and the baht hit another 13-month low.
The four economies have seen growth slow as China's appetite for their exports wanes. This has led to large current account deficits for three, which means they must borrow or run down reserves to finance their spending.
Malaysia is still running a surplus, although it narrowed sharply in the second quarter.
Their situation is worsened by fears that the United States Federal Reserve will soon reduce its massive stimulus, sending funds out of Asian stocks and bonds and putting more stress on the region's currencies.
Citi economist Johanna Chua said Indonesia's and India's options are limited by the current environment and past policies.
In Singapore, workers from India and Indonesia could be seen rushing to convert their earnings into home currencies to take advantage of the drops.
Most other Asian markets fell for a fifth day as nervy traders awaited the release of the Fed's July meeting minutes overnight. Singapore's Straits Times Index shed 0.6 per cent, Hong Kong fell 0.7 per cent, Taiwan lost 0.9 per cent and Seoul dropped 1.1 per cent.