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International Monetary Fund

Asia's Economic Turmoil Spreads, Global Economies Braced for Impact

Strategic Insights

— 2 min read

Asian economic crisis deepens, affecting Hong Kong, Singapore, Japan, Taiwan, Thailand, Malaysia, Australia, and New Zealand, as traders and investors struggle to cope with the fallout. East Asia's economic downturn has claimed a major Hong Kong finance house, Peregrine Investment Holdings Ltd., which announced its liquidation due to bad debts in Indonesia. The crisis has prompted U.S. and International Monetary Fund officials to pursue emergency measures to stem the crisis, and investors are bracing for further losses.

Key Takeaways:

  • The key Hang Seng Index closed down 773.58 points, or 8.7 percent, at 8,121.06, with Hong Kong shares now having shed 24 percent of their value in eight sessions.
  • Share prices crashed to a nearly seven-year low in Singapore, and fell in Japan, Taiwan, Thailand, Malaysia, Australia, and New Zealand.
  • However, prices rose on the stock markets of Indonesia and South Korea, despite the region's economic turmoil.
  • Brokers attributed the market's decline to rising Hong Kong interest rates and Friday's falls on Wall Street, saying it was "mainly driven by sentiment, not by fundamentals."
  • U.S. Deputy Treasury Secretary Lawrence Summers flew into Indonesia to meet with President Suharto to discuss measures to restore confidence and prevent the crisis from spilling over into the global economy.
  • International Monetary Fund deputy head Stanley Fischer met with Suharto, saying he expected Indonesia to announce strong measures within a few days to save its economy and revive its currency.
  • Indonesia's troubles were blamed for the fall of Peregrine, a Hong Kong finance house that had lent substantial money to an Indonesian cab company, Steady Safe.
  • About 200 worried investors flocked to Peregrine's office in Hong Kong, while Hong Kong leader Tung Chee-hwa expressed confidence in the territory's banking system.

Statistics:

  • The key Hang Seng Index closed down 773.58 points, or 8.7 percent, at 8,121.06.
  • Hong Kong shares have shed 24 percent of their value in eight sessions.
  • Share prices crashed to a nearly seven-year low in Singapore.
  • The Dow Jones industrial average in New York recovered to close at 7,647.18, up 66.76, after a 137-point slide at the opening bell on the Asian news.
  • Indonesia's rupiah plummeted to a record low on fears that Suharto's government was not complying with commitments made to the IMF in exchange for a $40 billion economic bailout.
  • The International Monetary Fund provided a record $57 billion bailout to the sinking South Korean economy.

Sources:

  • "Hong Kong Leader Tung Chee-hwa" - AP (no date provided)
  • "U.S. Deputy Treasury Secretary Lawrence Summers flew into Indonesia" - AP (no date provided)
  • "International Monetary Fund deputy head Stanley Fischer met with Suharto" - AP (no date provided)
  • "Indonesia's troubles were blamed for the fall of Peregrine" - AP (no date provided)
  • "Peregrine Investment Holdings Ltd. announced its liquidation" - AP (no date provided)
  • "U.S. and International Monetary Fund officials pursued emergency measures" - AP (no date provided)

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