Markets from Jakarta to Hong Kong leaped into the Year of the Tiger yesterday, with a zest reminiscent of the days before the slump of `97 when they led the world.
Analysts said it was too soon to say the Asian crisis was over but a new spirit of confidence saw long-term funds flowing back into Asia from Europe, followed by short-term injections from the United States. The region's markets have traditionally rallied on the first day after the lunar new year, and this - combined with Wall Street gains during the holiday, and positive developments in the three worst-hit Asian economies, Indonesia, Thailand and South Korea - supported the stronger tone.
Hong Kong recorded its highest gains in one day for ten weeks and brokers seem confident that much of the rise was solid, while warning that share prices could undergo a correction and fall back during the week. There was near euphoria in the stock markets of Hong Kong, Singapore, Bangkok, Jakarta and Manila, all of which showed double-digit percentage gains, with badly battered currencies consolidating at slightly higher levels against the US dollar.
Tokyo and Sydney markets also showed gains. While the rally demonstrated a new confidence in the international and national measures being taken to give the region a new start, individual economies remain volatile, with political and social turmoil feared in countries hard hit by bankruptcies and unemployment.
Indonesia is now the most unpredictable economy in the region, having suffered the biggest financial collapse of any emerging economy since World War II. However, it got a thumbs up from the markets yesterday for banking and economic reforms declared before the six-day national holiday which kept markets closed until Sunday.
President Suharto admitted in a Japanese newspaper that many of the gains of 30 years growth had been wiped out but said he was committed to breaking up monopolies and undertaking changes required by the International Monetary Fund. Under the fresh reforms the Indonesian government will guarantee the claims of depositors and creditors of local banks and open up the market to allow foreign investors to buy ailing banks and company assets.
Indonesian companies will temporarily freeze $65 billion in foreign debt in what Mr David Brougham of Standard Chartered Bank in Hong Kong - a member of a committee of lenders heavily exposed to Indonesian debt - described as "the biggest private debt rescheduling programme international banks have ever dealt with".
Some 228 Indonesian companies are eligible for what is a de facto debt moratorium for three months, during which full details of the debt problem will be worked out.
It is not a general debt moratorium and solvent companies must continue paying off dollar debts as they fall due. Asian markets also benefited from Thailand's decision to scrap its two-tier exchange trading system, separating on-shore and off-shore baht currency markets.
Market sentiment was also encouraged by a deal struck on Friday between South Korea and an international banking consortium which allowed Korean banks to exchange $24 billion in short-term obligations for new loans with maturity of up to three years.
The average rate of 8.1 per cent represented better terms than expected. However, Korean stocks fell back after last week's large gains. Drawing strength from the south-east Asian rally yesterday, Hong Kong's Hang Seng Index surged 14.33 per cent to end at 10,578.60. Only once, on October 29th last year, did the index close with larger gains. Chinalinked stocks also soared. "Short-term we may see some correction but it looks to me like the overall picture now is pretty bullish," said Mr Alex Wong, research manager at OSK Securities.
"There are early signs that the Asian financial crisis is coming to an end," commented Mr Anthony Yeun of Bank of America, "but the situation is very fluid and can change at any time."
Singapore shares ended sharply higher with the Straits Times Industrials Index ending up 13.74 per cent. Market volume of 753.11 million shares was the highest since the regional stock market bull-run in 1993.
