Asian markets get confidence infusion

Singapore: Asian policymakers rushed on Sunday to do their part in averting a global financial meltdown, boosting guarantees for depositors, promising to pump more cash into the battered credit markets and talking up their economies.

The region's authorities have long insisted that limited exposure of their fin-ancial institutions to the toxic US housing debt and sound economic fundamentals made Asia well placed to weather the worst financial crisis since the 1930s.

Guarantee

But last week's global equity markets sell-off that wiped out about a fifth of their value and spurred US and European authorities to rush out bank bailout plans, set off alarm bells in the region, particularly in countries that suffered the most during the financial crisis a decade ago.

Indonesia raised the government guarantee on bank deposits and made it easier for the central bank to pump funds into the tight money market, following a similar move by Australian and New Zealand authorities over the weekend.

Stability

Authorities in Singapore, Hong Kong and Bahrain also sought to calm investors with assurances that their banking systems were sound and that they stood ready to intervene if necessary.

"There has been unprecedented policy action around the world, including in India, and this has provided a short-term stability to the markets," said Amitabh Chakraborty, president of equities at Religare Securities.

Japan, where a failed medium-sized insurer became the country's first casualty of the global credit turmoil last week, said on Monday it would consider guaranteeing all bank deposits, if such a move proved necessary.

Mindful of the financial crisis that brought Asia's economic "tigers" to their knees a decade ago, Philippine President Gloria Arroyo called on Monday for Asian nations to be consulted in reshaping the financial world.

"I am urging the developed countries or G7 to consider the interest of developing countries in their plan to prevent a worldwide economic meltdown," Arroyo said as she called for a meeting of Southeast Asian nations plus economic giants China and Japan as well as South Korea next week.

Stock markets gained across the region on Monday after weekend crisis talks in the United States and Europe produced a flurry of initiatives to shore up their banks and local authorities sought to do their bit to restore market confidence.

Indonesia boosted its bank deposit guarantee to 2 billion rupiah (Dh745,010), helping the local stock market wipe out initial losses after it reopened following a three-day trading halt.

A 10 per cent limit imposed by the stock exchange on price swings, also helped underpin the market that lost nearly half of its value so far this year.

Current account deficit

In South Korea, where a rising current account deficit has revived the memories of the 1997-98 Asian financial crisis that almost derailed its economy, the bruised won currency and the local stocks gained and the authorities were quick to offer extra support.

Finance Minister Kang Man-soo said in an interview in Washington that not only the country's ample $240 billion in foreign reserves, but also its banks and corporations were in a better shape than 10 years ago.

Shareholders

"Our commercial banks are very sound and our companies' situation - especially the debt/asset ratio - is relatively sound. Therefore, on the banking side and the real side, we can absorb the shock from abroad," he said.

The South Korean authorities also announced plans to raise the limit for non-financial companies' investments in domestic banks and make it easier for pension and private equity funds to become controlling shareholders in lenders.