South-East Asian stock markets which plummeted on Monday on the basis of a Wall Street slump and the collapse of a large Hong Kong investment company, Peregrine Holdings, rebounded dramatically yesterday on reassuring news from Indonesia and a recovery on Wall Street.
Hong Kong, Singapore and Jakarta recovered nearly all their "Black Monday" losses, with the Hang Seng Index closing 7.38 per cent higher at 8,720.
The arrival in the devastated south-east Asia region of officials from the US Treasury also appears to have had a calming effect on the volatile Asian markets.
Traders took particular reassurance from a comment by the US Deputy Treasury Secretary, Mr Lawrence Summers, in Jakarta yesterday that President Suharto of Indonesia recognised the need for strong steps on economic reform. Criticism of Indonesia by the International Monetary Fund (IMF) last week precipitated a steep slide in stocks and currencies throughout South-East Asia. "It's clear that President Suharto recognises the need to take strong steps of the kinds that have been under discussion with the IMF to create confidence and to build on the very strong foundation for prosperity that Indonesia enjoys," Mr Summers said after meeting the Indonesian President.
The presence of the US official, dispatched to the region by President Clinton, seems to have had a profound effect on sentiment, and to have stiffened the resolve of regional leaders to accept bankruptcies and more open markets rather than opt for hyperinflation and debt moratoriums.
There was more bad news for Hong Kong, however, as the day came to a close. In a blow to its prestige, the former British colony announced a delay of more than two months in the opening of its new $20 billion airport, designed as a travel hub for all of South-East Asia. Aer Rianta has a contract to operate 12 retail outlets at the airport. A new opening date has been set for July 6th.
Moody's Investor Services also said it may cut Hong Kong's Prime-1 foreign currency ceiling for short-term deposits and would possibly downgrade the short-term ratings of three banks and three corporations. The Hong Kong Financial Secretary, Mr Donald Tsang, said: "In the past not all their ratings were very friendly towards Hong Kong. But Moody's is an independent firm. We need to accept the reality. We are a robust economy. Their [Hong Kong firms'] books are open, their operations are open. It is clear for all to see."
Tokyo stocks also ended higher yesterday with the benchmark Nikkei Index closing 0.62 per cent higher at 14,755.94. In early trading today, the market was up 1.2 per cent. Traders were at one point thrown into panic when a rightwinger armed with a gun held an exchange employee hostage on the stock exchange's 14th floor. He demanded that trading be halted and that the Finance Minister, Mr Hiroshi Mitsuzuka, come to the exchange.