This Chronology of the crisis is based on information from several news sources (Reuters, Wall Street Journal, New York Times, CNNfn, Financial Times, Bloomberg,etc.) 

Jan 2, 1998 - Friday.
    Cracks could be beginning to form in the alliance of international banks over the  extension of loans for South Korea.   While major U.S. and European banks announced  Monday that they would allow South Korean  customers more time to pay off an estimated $15  billion in short-term debt which came due on December 31, several smaller banks are unwilling to  do the same. The New York Times said Friday that these  smaller banks, which are still involved in negotiations,  may have had enough of South Korea's financial  troubles.  Part of the reason they are ready to pull their money out of the country is that they have less of it in  South Korea. Major banks with larger loans have  more to gain by transforming their debt into new loans which would pay a higher interest.  Smaller banks, which have already paid fees to South Korean banks acting as middlemen for their loans, don't want to incur any more fees despite the reward of higher interest rates.  One senior American bank official in the talks told  the Times that he was optimistic that the smaller banks would sign on to a rollover deal after further negotiations, however.  South Korea has been scrambling to alleviate its  financial troubles which arose from a combination of corporate bankruptcies and the weakening of its  currency, the won. In November, the country negotiated a bailout  package with the International Monetary Fund which eventually totaled about $60 billion. Restructuring its debt has been a critical issue for South Korea. It was expected to pay not only the $15 billion in loans which were due on December 31, but also another $15 billion next month. In addition, $8 billion of aid promised to the country  by international donors last month is dependent on portions of its debt being rolled over. Despite the bleak picture, South Korea may have options and even some bargaining power with the banks. In a plan being proposed by U.S. bank J.P. Morgan  & Co., South Korea could convert its bank debt into government-issued bonds with various maturities, the Wall Street Journal said Friday. This would have the positive effect of erasing the debt from Korean banks' books and would make it attractive to investors because the bonds would bear a government guarantee. Such a bond offering could total $15 billion. South Korean officials originally rejected the plan but are now reconsidering it.  South Korea's government may not need to take  such a drastic step, however. They may be reluctant  to take on the risk of the debt since the debt renegotiation process has been running smoothly and IMF loans are on the way.Instead, the government may choose to issue loans or traditional bond issues through the state-run Korea Development Bank, the Journal said. Such a move would limit the government's risk and involvement in the debt process.
    The Indonesian rupiah fell sharply against the dollar Friday on a ratings downgrade, and Malaysian and Philippine currencies also fell as trading resumed in parts of Asia after the New Year's holiday.  Financial markets remained closed in Japan, Taiwan, New Zealand and South Korea and Thailand. The rupiah's decline was attributed to a negative market reaction to  Wednesday's downgrade of Indonesia's sovereign rating by Standard &  Poor's, as well as to bearish sentiment to the region overall.  Investors also said that the rupiah's rise Wednesday because of central-bank   intervention was seen as overdone, while skepticism toward Indonesia's economic-reform programs is growing.  "We basically want to see if Indonesia will do anything to achieve the necessary compliance with the International Monetary Fund," said the head of Asian currency trading at a major German bank here. "The rupiah  direction hangs on this" he said.  In late Jakarta trading, the dollar was quoted at 5725 rupiah in the spot market, above 4,550 rupiah late Wednesday. The foreign-exchange market  was closed Thursday for the New Year's holiday.  Investors are now focusing on Tuesday's budget announcement by President Suharto as a potential forum to restore some confidence in the rupiah. They are looking for the government's commitment to cut spending,  raise tax revenue, and do away with wasteful programs.  Dealers noted that Jakarta court's decision Tuesday to delay the liquidation  of PT Bank Jakarta -- owned by Suharto's half-brother Probosutedjo -- has hurt market sentiment. The bank was one of 16 slated for liquidation under  the International Monetary Fund's $33 billion bailout package. "Continued corporate dollar demand for rupiah, combined with moves like  this, are killing the rupiah," said a Singapore foreign-exchange dealer at a  European bank.    The Malaysian ringgit tumbled to a new low against the dollar after investors  bought dollars in anticipation of increased corporate demand for the U.S.  currency over the next quarter. In late trading, the dollar was quoted at 3.9575 ringgit, up from 3.8755 ringgit  late Wednesday. The previous all-time low for the ringgit was 3.9250 to the dollar, reached two weeks ago. The Philippine peso also briefly slid to a record low against the U.S. dollar in  heavy trading. The dollar averaged 41.078 pesos at the close on the Philippine Dealing System, compared with 40.116 pesos on Monday, the latest previous  session. But it rose briefly as high as 41.80 pesos, surpassing the previous record low of 41.60 pesos to the dollar on Dec. 17.

Jan 5 - Monday. 
    Asian currencies plunged Monday as investors returned to the  foreign-currency markets and heavily bought the dollar. Selling drove the Malaysian ringgit, the Indonesian rupiah, the Thai baht and the Philippine  peso to record lows against the dollar.   At the end of Asian trading and at the start of European trading, the dollar   soared to 133.00, its highest level against the yen since May 11, 1992, in   early trading Monday. The dollar had traded at 132.40 late Friday in New  York.  The tumult in the currency market, in turn, hurt the Asian equities markets.   Japanese stocks fell on the first trading day of the year Monday when   investors back from a weeklong holiday dumped shares amid fear of further business failures. The benchmark Nikkei 225 Stock Average sank nearly  2% in an abbreviated half day of trading. Analysts said the dollar's rise is being fueled by economic fundamentals, which continue to  move in its favor, as well as strong corporate demand from Southeast Asia. Data from Japan show little sign of indicating anything other than an economy that remains mired in recession.
    At the same time, South Korea is still struggling to put together a commercial bank package that will help ensure that its corporate sector doesn't default on loans this year. Latest discussions are said to revolve around a $21 billion proposal including sovereign bonds and a syndicated  loan.  Southeast Asian currencies were sharply weaker across the board from the  start of Asian trading, as buying in the U.S. dollar for the new year began in earnest. Volume has picked up considerably from the holiday lull, with U.S. dollar strength pushed primarily by corporates seeking to cover foreign debt, traders said.
    Traders said the slew of factors behind the currency declines included uncertainty over Indonesia's budget announcement Tuesday and the health of President Suharto, falling regional stock prices and worries about possible speculative attacks on other Asian currencies like the Chinese yuan and Hong Kong dollar. Even intervention Monday by Malaysia's Bank Negara to sell small amounts U.S. dollars for ringgit couldn't help stem the ringgit's slide Monday, said  dealers. "Until we see some equalization of dollar demand and supply, southeast Asian currencies will lose ground," said Daniel Lian, head of Asian markets  research at ANZ Investment Bank Singapore. The U.S. dollar gained 8.7% versus the rupiah, 4.8% against the baht, 2.7%  against the ringgit and 1.6% against the peso during the day.  Dealers and analysts also predicted that Southeast Asian currencies will continue their downward spiral with no relief in the short term. More active trading Monday showed that the sell-down is once again gathering momentum, they added. The Malaysian ringgit hit a new historical low of 4.0600 against the dollar in late Asian trading Monday on what dealers believe was speculative buying  of the U.S. dollar. Dealers said Malaysia's central bank, Bank Negara, tried to intervene to stop the decline but to no avail.  In late trading, the dollar was quoted at 4.0550 ringgit, up from 3.9730 ringgit late Friday. The Philippine peso Monday set a record low at 42.650 pesos against the  dollar. After the U.S. currency darted through a three-tiered volatility band  within the first 90 minutes of currency trading, trading on the Philippine Dealing System virtually ground to a halt, with no transactions above 42.650 pesos permitted for the rest of the session. At the close, the dollar averaged 41.738 pesos on the PDS, up 66 centavos from Friday's reference rate of 41.078 pesos.  Indonesia's rupiah also fell to its all-time low in thin dealings late Monday on fears about the country's economic prospects. After falling to a new low of  6,750 rupiah to the U.S. dollar earlier in the day, the rupiah was trading at 6,637.50 rupiah in the spot market in late trading, down 9.6% from its close Friday at 6,000. Against the Thai currency, the dollar was at 50.25 baht, slightly below the record of 50.60 baht seen intraday Monday but higher than the 48.05 baht seen late Friday. The South Korean won fell because local importers heavily bought the U.S. currency. The dollar closed  at 1,780 won, higher than 1,695 won Wednesday, the last trading day of 1997. Local importers traditionally increase their purchase of dollars early  each month. The drop in Singapore's key trading partners like Malaysia and Indonesia drove the U.S. dollar to an intraday high of 1.7090 Singapore dollars, shy of  the psychological S$1.71 level, said traders. Late in the day, the currency  was quoted around S$1.7109, up from S$1.6955 at about the same time on  Friday.  The New Taiwan dollar fell to NT$33.226, the lowest level since April 1987. The U.S. dollar ended the session at NT$33.226, the highest since  NT$33.260 was reached on April 27, 1987, as the strong U.S. dollar continued to gain against regional currencies.   However, concerns Hong Kong monetary authorities would intervene in the local currency market Monday supported the Hong Kong dollar. In late  trading, the U.S. dollar was unchanged at HK$7.7495 from late Friday.
    Japan's Nikkei fell 2% and Hong Kong's Hang Seng 3.5% Monday amid  continued worries about the regional currency markets and domestic  economic prospects.  Asian markets were rattled when the Malaysian ringgit, the Indonesian  rupiah, the Thai baht and the Philippine peso fell to record lows against the  dollar. Hong Kong equities continued to fall as renewed concerns about Southeast Asian currencies pushed local interest rates higher. The blue-chip Hang Seng Index closed near the day's low of 10301.35 at 10303.54, losing 377.03, or 3.5%. Meanwhile, the broader All Ordinaries Index declined 145.31, or 2.8%, to 5123.32. A total of 5.13 billion Hong Kong dollars worth of shares were traded on the day. Worries about weakness in the region's currencies forced Hong Kong  interbank rates to rise sharply. The benchmark three-month Hong Kong Interbank Offered Rates was quoted at 10.00%, up substantially from a  range of 8.875% to 9.125% late Friday. Elsewhere, the Kuala Lumpur Stock Exchange Composite Index plummeted  4.4%, while equities markets fell in the Philippines, Singapore, Taiwan and Thailand.

Jan 6 - Tuesday.
    Asian financial markets took another heavy battering on Tuesday as U.S.  funds cut asset allocations and companies desperate to  hedge their exposures fled regional currencies for the rampant U.S. dollar.   Several Southeast Asian currencies plunged to new   lows, taking some stock markets down with them. The currency blight spread to Australia and New Zealand and gold dipped to a new 18-year low on worries about weak Asian economies and deflation.The Indonesian, Malaysian, Thai and Philippine currencies plunged to new lows, dragging stocks in tow, as Asia's slowing economic growth kept investors away. The four currencies have fallen to record lows on each of the three trading days in the new year. The Indonesian rupiah, for instance, has lost 27 percent of its value this year, after a whopping 56 percent decline last year made it the world's worst-performing currency against the dollar. Today, the rupiah tumbled as much as 14 percent to 7,700 per dollar -- its lowest level since it began trading in 1971.
    Monetary exchange dealers said short covering  lifted some currencies like the Malaysian ringgit and Singapore dollar off their early lows but the general undertone for regional currencies remained weak.  "The move down has been too swift and sharp. But there will be buying of dollars on any dips. Local corporates are still looking buying dollars for their own  exposure," said a dealer with an U.S. bank.  Dealers said concern over the Malaysia's   short-term debt and nervousness over a budget speech  by Indonesian President Suharto later in the day as  well as the cloud of gloom over regional economic  prospects spurred dollar buying.   The dollar also strengthened against the Japanese  yen, rising to a high of 134.38 yen in early trade, its  highest level since April 1992, prompting the Bank of  Japan to intervene. "American funds have been pretty aggressive in  buying dollars across the board. It is hard tell which  currency is leading in this latest round of falls, whether  it's the ringgit or the rupiah," said a currency dealer at   a European bank.   "The Asian currency crisis is turning into an Asian  debt crisis," said a dealer at an American investment  bank.  He said new figures from the Bank of International  Settlement showing Malaysia's short term debt at 56 percent of total borrowings from overseas banks,  higher than a general 30 percent estimate, spooked the  market.  "It just shows that people do not have a handle on the situation," he said. The Malaysian ringgit settled at 4.3450 after  hovering between 4.1800 and 4.3400 throughout the day. Late on Monday it was at 4.0550. Malaysian shares were caught up in the battering with the key share index slumping 3.85 percent, or  21.05 points, to end at 525.74.   The Indonesian rupiah hit a record low of 7,700 against the dollar in early trading but short covering brought it back up to its opening level of 7,000 in the  late afternoon.  Dealers said the rupiah remained weak on fears that the government lacked the political will to meet  the tough conditions imposed by the International  Monetary Fund for a $40 billion loan package. The IMF targets include a budget surplus of one percent of gross domestic product for the financial  year beginning April 1.  Dealers said they expected dollar/rupiah to reach  8,000 in the short term and perhaps 10,000 over the  next six months.  The Singapore dollar fell in sympathy with its two  closest neighbors. The Sing touched a low of 1.7420  after opening at around 1.7200. It was hovering at 1.7345/85 in late afternoon.  The weak Sing pulled Singapore shares lower with the key share index shedding 3.80 percent, or 56.83  points, to end at 1,439.12.  "We are advising our clients to stay away. We are not even saying this is a right time to go in to search for good buys. Not in this market," said one share dealer.  The Thai baht plunged to a new low of 52 to the  dollar after Bangkok said it wanted to review the IMF terms for its $17 billion aid package. The Taiwan dollar touched a 10-year low of  T$33.999 in early trade and recovered to close at  T$33.755, but still more than half a Taiwan dollar  below Monday's close of T$33.226.
    Faced with a plunging currency and its first recession in 20 years, Indonesia will unveil a fiscal 1998-1999 budget today that it hopes will help restore some confidence in its hobbled economy. The budget will be announced by President Suharto in a nationally televised speech that will be his second major public appearance since taking an unprecedented two-week rest in December. He'll speak to the Indonesian House of Representatives at 8:30 p.m. Jakarta time. The rupiah's plunge -- it is down 69 percent to the U.S. dollar since the start of 1997 -- is expected to destroy corporate profits, since most of Indonesia's large companies borrowed in dollars to fund aggressive expansion plans. That's going to leave the government with shrunken tax receipts, rising unemployment and its highest inflation in a decade.
    The dollar slipped from an earlier five-and-a-half-year high after Japanese Finance Minister Hiroshi Mitsuzuka suggested Japan may sell dollars to curb the U.S. currency's rise. Japanese officials are concerned about the yen's drop and will support their currency, Mitsuzuka said. The Japanese currency dropped as low as 134.33 per dollar in early Asian trading today. Mitsuzuka's comments temporarily halted the dollar's surge -- four yen over the past three trading days -- amid concern about Japan's flagging economy, troubled banking system and mounting bankruptcies.
    The New Year began on a dark note Monday as Thailand announced  that it would ask the International Monetary Fund to ease the terms of its $17.2 billion bailout package and as its currency, the baht, fell to a new low of less than half its value last summer. Prime Minister Chuan Leekpai said Thailand would seek to soften an IMF requirement that it produce a budget surplus this year. He cited the weakening currency and worsening economic situation since the package was agreed to five months ago. "We have cut spending substantially but shortfalls in revenue will be as high as 100 billion baht, which makes it important to adjust the plan," he said.   Akapol Sorasuchart, a government spokesman, said that Thailand would not be asking for any additional funds from the IMF. The prime minister's bad tidings were underscored when the Thai currency dropped for the first time  though the psychological barrier of 50 to the dollar -- down from about 25 to the dollar when the  government was forced to let it float last July. It was quoted in midmorning at 51.05 to the dollar before  recovering slightly in the afternoon.  The IMF package, agreed to in August, was based on the projection that the baht would stabilize at about 32 to the dollar.  The weakening currency has made it sharply more expensive for Thailand to service its huge overseas dollar debt, Akapol said. In addition, he said, the slower economy has reduced tax collections, making it  harder to produce a budget surplus.  Thailand's recovery has also been hampered by the spreading downturn throughout the region, which  has reduced foreign investments and cut into the competitiveness of the cheaper baht.  As markets opened Monday after the New Year's break, currencies around the region -- in Indonesia,  Malaysia and the Philippines -- joined the baht in hitting record lows. The Malaysian ringgit fell for the  first time past the level of four to the dollar and the Philippine peso fell for the first time past 40 to the   dollar. Thai Economists say they expect to see widespread unemployment, bankruptcies and possible social unrest  this year as growth rates plummet and governments institute austerity measures.  Chuan took office last November after the fall of a previous government that had failed to address the   worsening economic situation. He has been widely praised for beginning to institute austerity measures,  but these measures could arouse a political backlash.    Last week, Thai labor unions threatened mass protests if the government failed to take concrete steps to control unemployment, which economists predicted could reach two million by the end of the year.   An attempt by the previous government to close the budget deficit by raising fuel prices aroused a   public outcry and was withdrawn after just three days. Chuan said Monday that he would send Finance Minister Tarrin Nimmanahaeminda to Washington this  month to ask the IMF to ease its requirement that Thailand produce a cash surplus equal to 1 percent  of its gross domestic product in the fiscal year ending in September.   In a review of the rescue package two months ago, the IMF already took account of the worsening   economy, adjusting Thailand's required growth in 1998 to between 0.0 percent and 1.0 percent, from its  initial requirement of 3.5 percent. Until the economic crisis hit this year, Thailand's economy had been  growing at an average of about 8 percent a year for the last decade.  Last week, Tarrin said even the new, lower target could not be met. He projected for the first time that the Thai economy would shrink this year, estimating a negative growth rate of about 0.7 percent.  Thailand has been struggling to meet the requirement for a cash surplus and has already cut its 1998  budget three times this year, to 800 billion baht, from 982 billion baht. Austerity measures have been instituted, including pay cuts for politicians and senior civil servants and reduced spending on military equipment. The value-added tax has been increased on all goods and  services and excise duties have been raised on a variety of imported luxury goods and automobiles.   But the unchecked fall of the currency has made a budget surplus a continuously receding mirage.  In a year-end assessment last week, Chuan said that if conditions were favorable, the economy could  begin to recover by the third quarter of 1998. He said his view was based in part on predictions that the  baht would stabilize at about 35 to the dollar.  But the central bank governor, Chaiyawat Wibulswasdi, in a separate assessment, said the economy  could hit bottom in the third quarter. He said he based his view on predictions that the baht would stabilize at about 40 to the dollar.

Jan 7 -Wednesday.
    Doom and gloom hung over Asia's stock markets on Wednesday with some  plunging more than five percent on fears over the region's sliding currencies.  The Indonesian, Malaysian, Thai and Philippine currencies fell to new lows, dragging stocks down across much of Asia, as Indonesia's budget failed to convince investors that countries in the region are committed to reforming their economies. The currencies have fallen to record lows on each of the four trading days in the new year, even as central banks signaled they would buy their currencies to stem the fall.  The Indonesian rupiah fell as much as 12% to 8,400 a dollar; the Thai baht fell as much as 4.2% to 54.75 a dollar; the Philippine peso fell as much as 2.8% to  46.5 a dollar. There were some bright spots, with South Korean shares rallying on overseas buying and stocks in  Thailand benefiting from some speculative buying. But by the close, most of these gains were erased. Only Tokyo held onto modest gains. The breath-taking slide of most local currencies, brought on by a rising U.S. dollar, has sapped theregion of any lingering confidence. Indonesia's rupiah led the fall on Wednesday,  breaching the 8,000 level after opening at 7,500/7,900  to the dollar amid disappointment over the country's  latest budget.  "With the outlook for Asia's currency crisis looking gloomier and gloomier, there is little prospect for the stock market to rise," said Michael On, managing director of Young Asset Management Co.  South Korean stocks had rallied, supported by  buying in blue-chip Korea Electric Power Corp., but the gains fell victim to profit-taking toward the close.  Korea's key index ended only 0.76 percent, or 3.08   points, higher at 409.42, after being up 2.43 percent   earlier.  Stocks in Hong Kong and Singapore posted the  most dramatic declines in percentage terms. Both their key stock indices plunged through psychologically    important levels as did that of the Philippines.  The fall in regional currencies and rising local  interest rates pushed Hong Kong's Hang Seng Index   below the key 10,000 point level in early trade. Later,  a sell-off in China-related stocks exacerbated the    decline.  "This is a nasty meltdown," said Janet Gillies,  associate director of OCBC Securities. The Hang Seng index dropped 5.89 percent, or 596.90 points, to end at 9,538.61, while the red chip index shed 10.75 percent and the H-share index collapsed 12.17 percent.  Singapore's Straits Times Index also broke through an important level-- 1,400-- on weak sentiment. The index was down 5 percent, or 73.26 points, at 1,367.20  midday. "The currencies have been a leading indicator and they are going to get worse," said Thomas Schroeder,  director of technical research at SocGen Crosby in  Singapore.  Singapore shares closed down 71.06 points, or 4.94  percent, to close at 1,368.06. U.S. markets were hurt by fears the shakeout  would pinch the earnings of U.S. companies that sell  their goods abroad. The Dow Jones Industrial   Average ended 0.91 percent, or 72.74 points, lower at   7,906.25 on Tuesday.  In Tokyo on Wednesday, dealers were encouraged by the latest plan to boost the market, but divided over  the overall impact it could have on trading. "The plan may promote transparency and fairness  of share trading...but it may not encourage investors to  buy at higher prices," said Seiki Orimi, an analyst at  Dai-Ichi Securities. The key Nikkei 225-share index ended 0.88  percent, or 131.77 points, higher at 15,028.17.

Jan 8 - Thursday.
    Frantic selling shredded Indonesia's financial markets on Thursday, highlighting a sweeping lack of confidence in the country's economic management and contributing to a sell-off on most other Asian markets.  The meltdown in Indonesia, which has heightened gloom across a region once brimming with unbridled optimism, showed no sign of abating and raised the specter of civil unrest in the mainly Moslem country, home to 200 million people. Indonesian stocks crashed 18.5 percent in mid-afternoon, before recovering to be off 11.95 percent, or 47.13 points, at 347.10 in late trade. The rupiah skimmed the 10,500 to the dollar barrier, hitting a low of 9,900 by noon before recovering to be quoted at 9,500 late afternoon.  The plunge of 26% in a single session left the rupiah down more than 70% since the Asian crisis began last July.
"I think there is going to be further weakness. There is no liquidity at all in the foreign exchange market, there is no natural buying of rupiah."  Indonesia's woes sparked jitters around the region, and analysts have expressed concern about the prospect of a Jakarta debt moratorium.
    Stocks in Hong Kong closed sharply lower and Singapore shares were battered by the fallout in Jakarta, with the Straits Times Index falling below the key 1,300 support level.  "A lot of people decided to cut losses once the index broke through 1,300," another dealer said. The Singapore index was down 97.36 points, or 7.12 percent, to 1,270.70. Most regional currencies kept heading south against the U.S. dollar.  A contagious mix of sinking currencies, growing foreign debt and collapsing financial systems has sickened Asian economies in the last six months. Indonesia's financial crisis gathered steam this week, stemming from fears the government of aging President Suharto was incapable of dealing with the situation.  Economists have blasted the Jakarta leadership for failing to announce tough reform measures in the country's national budget handed down on Tuesday and for unveiling unrealistic economic forecasts. The fall in the rupiah on Thursday was sparked by comments by U.S. Deputy Treasury Secretary Lawrence Summers that Indonesia needed to show its commitment to reforms agreed with the International Monetary Fund (IMF) under a multi-billion dollar bail-out plan drawn up in October.  Japan's Ministry of Finance added its weight, saying it hoped Indonesia would take steps in accordance would the IMF rescue deal. The stock market plunged on Thursday on various rumors -- the most prevalent was that Suharto would not seek re-election in March presidential polls. Brokers said there was little basis for such talk. Earlier on Thursday Asia won a boost from a stronger yen, but the lighter mood was short-lived amid a seemingly endless crisis of confidence over the future of the region's shell-shocked economies.
    Some Asian currencies had earlier taken a breather from recent staggering declines against the U.S. dollar, gaining from speculation about possible U.S. intervention to support the sliding Japanese yen. Speculation that Japan would take more steps to bolster its faltering economy sparked a surge in share prices and a drop in the dollar, but doubts persisted whether or when such hopes would be realized. The Nikkei average rallied early on speculation of the added steps -- spurred in part by visits to Washington this week by top finance diplomat Eisuke Sakakibara, Economic Planning Minister Koji Omi and Deputy Chief Cabinet Secretary Fukushiro Nukaga. It fell back to close down 8.99 points, or 0.06 percent, at 15,019.18 points.  The dollar tumbled below 132 yen in morning trade on the rumors and on jitters over possible joint market intervention by the U.S. and Japanese central banks to halt the yen's slide, but bounced back to about 132.80 yen in the afternoon.  But all eyes were on Indonesia's hemorrhaging markets.
    There were reports the IMF had written a "strongly worded" letter to Jakarta in response to a budget widely condemned as insufficiently austere. Attention was increasingly focused on the political situation, with fears tough IMF conditions have heightened the likelihood of social unrest prior to the March presidential poll in which Suharto, 76, was expected to run for a seventh five-year term. "There are signs of the social aspect starting to unravel, with people calling for Suharto to step down," said Callum Henderson, managing analyst at MMS International. There were reports of panic buying of food in some Indonesian supermarkets on Thursday on fears prices would spiral up. The late weakness in the Japanese yen and the rupiah all but erased an earlier rebound in the Taiwan dollar, sending the rate back below T$34 to near Wednesday's 10-year closing low. It closed at T$34.325. Hong Kong stocks slumped to a sharply lower close on Thursday, battered by worries about regional economies and rising local interest rates. The Hang Seng Index lost 284.08 points, or 2.98 percent, to end at 9,254.53 after hitting an intra-day low of 8,928.86.
    In South Korea, attention was focused on a key meeting with bankers in New York on Thursday.   South Korea needed to hammer out an agreement with international banks in the next few days on rolling over or converting the country's staggering short-term debts, a Finance Ministry official said.  "What's clear is Korea has $20 billion due by the end of January that either has to be rolled over or converted," he said. The country faces another estimated $20 billion debt bill coming due in February and March.  The won closed at 1,788, compared with Wednesday's 1,745 finish.  But the Seoul stock market bucked the trend, closing sharply higher on as a late spurt of foreign buying buoyed overall sentiment, brokers said. The composite stock index ended up 14.54 points, or 3.55 percent, at 423.96. 

Jan 9 - Friday.
    Concern over Indonesia  hit Asian stocks on Friday, but currencies won some support on hopes of an imminent deal between U.S.  banks and heavily indebted Indonesian companies.   Expectations of some type of Indonesian debt accord intensified following telephone conversations  between U.S. President Bill Clinton and Asian leaders,  and a new commitment from Indonesian President Suharto to implement economic reforms. "They're trying to strike some deal," one head   trader at a major European brokerage told Reuters. "Probably, U.S. banks have just taken on most of  the Indonesian banks' debt. It's not very good for Wall  Street."  Although the mood remained tense throughout Asian markets, the Indonesian rupiah recovered nearly 30 percent to 7,600 against the U.S. dollar from a day  low of 10,500 before paring those gains to trade at  8,400/9,150 midday.  Suharto pledged his commitment to implement  economic reforms attached to a US$40 billion financial aid package negotiated last year, a significant shift after tabling an expansionary 1998/99 budget on Tuesday that failed to outline the economic austerity  required by the International Monetary Fund (IMF).  IMF officials were expected to arrive in Jakarta  this weekend following statements by Stanley Fischer, IMF deputy managing director, that the agency  wanted to accelerate Indonesia's program.  One tranche of US$3 billion has already been released. Markets were speculating the IMF officials  could bring with them approval for early disbursement of a second tranche originally slated for mid-March. The developments all boosted expectations of a  South Korean-style solution, where debtors and
creditors agree some type of debt management scheme to avoid outright default, such as a rollover of  short-term debt.
"The implication is that Indonesia and Thailand both need a Korea-type solution where bankers speak to  debtors and the IMF stays in Washington," said Ajay Kapur, regional strategist at UBS Securities.  Weak Asian currencies also won some support from strong rumors of intervention by the United  States, Japan and Germany. Overnight, rumors surfaced of quiet U.S. Federal Reserve sales of  dollars against Southeast Asian currencies or the yen.  But stock markets continued to suffer. Singapore,  one of Asia's healthiest economies, fell more than eight percent as fears of a debt moratorium in
Indonesia sent shockwaves through the market. The main index tumbled to a low of 1,162.99 before closing  7.43 percent weaker at 1176.35.. In South Korea, shares tumbled 9.96 points, or 2.35 percent, to 414.00. Tokyo stocks recouped most of their early losses  but ended weaker, as a suggestion by an official of  Japan's ruling party to make permanent a one-off
income tax rebate failed to significantly boost the market, brokers said.  The idea was nothing new and the impact was
limited, brokers said. The 225-share Nikkei average closed down 24.08 points, or 0.16 percent, at 14,995.10.
Hong Kong stocks plunged to a sharply lower close  as investors remained unnerved by turmoil in regional  markets and higher local interbank rates, brokers said. Hong Kong's benchmark Hang Seng closed down  3.89 percent to 8,894.64, after touching 8,721.09 in early trade, its lowest level since May 10, 1995.  Investors were unnerved by regional turmoil and
higher local interbank rates, brokers said.  Currencies in Singapore, Taipei, Bangkok, and  Malaysia were all slightly firmer.
    A proposal for the South Korean government to issue about  $25 billion in bonds to stem the country's debt crisis won increased support at a meeting of international banks Thursday, bankers who attended the talks said.  But with several major banks still hesitant about endorsing the plan, and the  Korean government indicating it needs another week to make a decision, proponents of the plan were left frustrated about the pace of the  negotiations. "We made some progress, but not as much as we would have hoped," said one banker who attended the New York meeting.  The international banks did agree to continue rolling over their short-term  loans to Korean banks through March 31, by which time they expect the Korean government to have proceeded with the bond plan or with some other long-term solution to the country's debt crisis. Separately, the International Monetary Fund Thursday approved the release  of $2 billion in emergency aid to South Korea, bringing to $13.1 billion the   total outlays since early December. The IMF and the South Korean  government agreed to several reduced economic targets for Korea,  including gross domestic product growth of between 1% and 2%, down from an earlier target of 2.5%.   The bond plan discussed Thursday in New York, crafted by J.P. Morgan &   Co. in cooperation with Citicorp and Chase Manhattan Corp., calls for the Republic of Korea to issue approximately $25 billion in bonds. The offering   would include $10 billion in bonds sold for new cash to bolster Korea's  waning foreign-exchange reserves. The remaining bonds would be issued to foreign lenders who wish to take them in place of their short-term loans to Korean banks. The plan, modified from an earlier version, calls for the bonds to have  maturities of one, three, five, 10 and 20 years. The bonds would be denominated in multiple currencies -- likely yen, marks and U.S. dollars -- in  a bid to appeal to German and Japanese banks, which are among the largest creditors to Korean banks.  But it is the Germans and the Japanese who remain among the most prominent holdouts on the plan, which won endorsements at Thursday's  meeting from U.S. investment banks Merrill Lynch & Co. and Lehman   Brothers Holdings Inc., as well as commercial banks in Switzerland and the Netherlands.  The German banks, along with banks in France, Italy and England, haven't   reached a conclusion on the plan, the bankers say, though most are   considered likely to go along with it. The Japanese banks like aspects of the  plan, bankers say, but are hesitant because they fear that an exchange of  bank debt for government bonds would jeopardize relationships between  individual creditor banks and borrowers.
    The Korean government, of course, must ultimately choose whether to  proceed with the plan, or some alternative, such as a plan advocated by  bankers at Goldman, Sachs & Co. and the Salomon Smith Barney unit of Travelers Group Inc. That proposal calls for a $5 billion syndicated loan to  bolster the government's foreign-exchange reserves immediately, to be
followed by a bond offering of $9 billion or $10 billion. It wouldn't convert  Korean banks' debts into bonds, but would instead allow banks on their own  to renegotiate debt that is now being rolled over.  A policy maker in Seoul said there's disagreement within the government  over which financing option to take, but he refused to elaborate. Bankers say the incumbent Korean administration favors a solution along the lines of  the Goldman-Salomon plan, because it might allow for below-market interest  rates; the incoming administration, which takes office in February, is said to  prefer the debt-exchange proposal, because it is more comprehensive and  wipes the bad debt off the Korean banks' books, though it may be more  expensive. A Finance Ministry representative who attended Thursday's meeting told  bankers the government needs another week to make a decision. The   representative said an "official Korean delegation" will arrive in the U.S. to
conduct "substantive" talks during the week of Jan. 19.
    In the U.S., blue chips fell more than  200 points Friday, capping off one of the worst weeks  in Wall Street history, as investors worried about a  new escalation in Asia's financial troubles.   Turmoil in Far Eastern markets, led by Indonesia, fueled fears that earnings of U.S. corporations would be hit by the ripple effects of the Asian crisis.  The Dow Jones industrial average suffered its  fourth worst one-day point loss, tumbling 222.20  points, or 2.85 percent, to 7,580.42. The blue chip  index also scored the biggest weekly point loss in its  history, finishing the week 384.62 points, or 4.83  percent, lower. The Dow is down 4.15 percent on the  year.  The stock market's weakness fueled a rally in  bonds after several swings up and down following a  surprisingly strong December U.S. employment report.  Although the Labor Department reported that the  unemployment rate rose to 4.7 percent last month from November's 24-year low of 4.6 percent, figures  also showed the economy churned up 370,000 new non-farm jobs, beating Wall Street expectations of  about a 209,000 gain.  A flight to quality amid the poor performance of world stock markets helped increase bullish sentiment in bonds. The benchmark 30-year Treasury bond surged 23/32 in price for a drop in the yield to 5.69  percent.  "Growth is likely to be lower in '98 than it was in '97. So, to re-balance monetary policy, you're going to have to lower interest rates," said Matt Alexy, chief market strategist at CS First Boston. "The question is by how much? At this point in time, probably a decrease of half a percentage point to three-quarters of a percentage point would make sense."

Jan 12 - Monday.
    Asian stock markets plunged on Monday, led by an 8.7% drop in the Hong Kong market. Japanese stocks lost 2.2% and Taiwan's market fell 4.7%, but Indonesian stocks rebounded 2.1% amid hopes that Jakarta will abide by terms of an International Monetary Fund bailout.
    The failure of Peregrine Investments Holdings Ltd., a big Hong Kong investment bank, helped to topple stocks in the territory. Once Asia's most powerful home-grown investment-banking house, Peregrine on Monday said it moved toward a liquidation, its capital depleted in large part by investments it made in Indonesia.
    The Hang Seng index plummeted roughly 900 points at its low for the day and recovered just a modest portion of that later. It closed with a gaping loss of 773.58, or 8.7%, to 8121.06. The broader All Ordinaries Index fell 414.08 to 4033.09, as trading volume climbed to 13.33 billion Hong Kong dollars worth of stock, up from HK$11.65 billion on Friday.
    The news about Peregrine came as investors sorted through other concerns in Hong Kong. For one, investors throughout Asia on Monday reacted to the continued weakness that was seen in Wall Street stocks on Friday. Meanwhile, interbank interest rates climbed sharply Monday in the territory. The Hong Kong Interbank Offered Rate was quoted at 12% by Wing On Bank Ltd., up from 7.5% late on Friday.
    Elsewhere, the Nikkei 225 index dropped 330.66, or 2.2%, to 14664.44, the lowest level since July 1995, as investors focused on economic woes in Japan and elsewhere in Asia. Speeches in Parliament by Prime Minister Ryutaro Hashimoto and Finance Minister Hiroshi Mitsuzuka offered little comfort to investors. They pledged to stabilize the country's finances, but didn't provide new details on their plans.
    Other big losers included the Taiwanese market, which dropped 4.7%; the Thai market, which fell 3%; the Australian market, which slumped 2.3%; and the Malaysian market, which skidded 2.9%.
    But Indonesian stocks rose 2.1% and the South Korean market added 3.5%. Those markets, which have been the focal point in the Asian crisis for more than a month, were aided by hopes for International Monetary Fund bailout efforts to help both countries.
    In Jakarta, a senior economic adviser vowed that the nation will continue to make international debt payments. At the same time, President Suharto moved to halt 15 costly infrastructure projects. Mr. Suharto's moved helped to boost confidence that the country will abide by terms of an IMF bailout package. Top IMF officials arrived for talks in Indonesia on Sunday.

Jan 13 - Tuesday.
    Asian-Pacific share prices rebounded Tuesday, a day after Hong Kong plunged on news that a prominent financial institution collapsed financially. After plunging 8.7% on Monday, the benchmark Hang Seng closed up 7.4% as investors shook off the impact of investment bank Peregrine Investment Holdings Ltd.'s liquidation. The rebound was expected after slight recoveries of Hong Kong stocks in London and on Wall Street on Monday. Traders credited the Hang Seng's gain to a technical recovery. The broader All Ordinaries Index rose 180.13 to 4213.22. Trading volume slid to 11.04 billion Hong Kong dollars, compared with HK$13.33 billion in the previous session. But the demise of Peregrine, which on Tuesday named Price Waterhouse as its provisional liquidator, had little effect on Tuesday's trading, called a technical rebound by traders. Investors also ignored a surge in interbank rates in the morning as a result of news that Moody's Investors Service is putting some Hong Kong ratings on review for possible downgrade. But rates steadied and even showed signs of easing in the afternoon. Analysts said investors seemed to have digested all the bad rate-related news, including last week's 75-basis-point rise in prime lending rates, which is likely to cast a shadow over the 1998 profit margins of the territory's banks and property developers. The overnight interbank rate rose early, but by late Tuesday had steadied to 12%, the same level recorded a day earlier. The three-month rate fell to 16% from 18.5% late Monday. Money market dealers said they believe the Hong Kong Monetary Authority injected funds into the interbank market to bring most rates lower.
    As on Monday, the Hong Kong dollar proved impervious to concerns that shook other markets. It traded in a 40-point range Tuesday and was quoted at HK$7.7435 late in the day, actually a bit stronger than the HK$7.7460 level quoted late Monday. Lifted by the regional rebound and bargain-hunting, Australia rose 1%, Manila rose 3.8% and Taiwan rose 1.9%. Tokyo rose 0.6% on quiet trading.  South Korea's key index rose 1.7% when investors were encouraged by remarks from the head of the International Monetary Fund Michel Camdessus indicating that he is confident the IMF bailout program will work for South Korea. Indonesian share prices surged 9.1%, driven by the early rebound of some large-capitalization shares amid news that talks between President Suharto and the International Monetary Fund as well as top U.S. officials are going well.Shares jumped 7.7% at the Stock Exchange of Singapore in what dealers termed a technical rebound after seven straight days of steep losses. Thailand rose 2.9% and Malaysia rose 5.5%.
    The International Monetary Fund and Indonesia appear to be near an agreement over the IMF bailout, while the stock market rose 9.1% Tuesday on optimism over the talks. Tuesday, Indonesian State Secretary Murdiono said President Suharto told visiting U.S Deputy Treasury Secretary Lawrence Summers that Indonesia will implement its economic reform program "as soon as possible."  Mr. Summers left the talks saying the 76-year-old Mr. Suharto "recognizes the needs to take strong steps" on economic reform to end the currency crisis. Indonesia's Finance Minister Mar'ie Muhammad said that there might be adjustment in some of the programs in the economic reform "as a result of the latest development in the economy."
    Mr. Mar'ie made the comments after he met with IMF's deputy managing director Stanley Fischer. He, however, declined to give further details. Mr. Mar'ie only said that the changes will be announced Thursday after Mr. Suharto meets IMF's Managing Director Michel Camdessus. In optimism over the talks, Indonesia's benchmark index for the equities market rose 9.1%.  In late trading, the rupiah was trading at 8,125, up from its close on Monday at 8,625 to the dollar. Meanwhile, Indonesia's two top Islamic leaders ratcheted up the political heat by announcing support for opposition leader Megawati Sukarnoputri's symbolic candidacy for president. In Paris, Credit Lyonnais bank said Indonesia's state-owned airline, Garuda, in December missed two interest payments totaling $8 million on aircraft loans. Garuda couldn't be reached for comment.
    Investor confidence in Indonesia has been shaken in recent months by Indonesia's apparent unwillingness to live up to an agreement with the IMF that required the country to make huge cuts in public spending and other economic adjustments. That confidence was echoed Tuesday morning by Mr. Summers, upon emerging from what he called a "very good discussion" with Mr. Suharto. After the meeting, the U.S. official was due to fly to the Malaysian capital, Kuala Lampur, and Bangkok for more consultations Tuesday. The Treasury announced Monday that he also is going to stop this week in Hong Kong, Beijing and Seoul, South Korea, before returning to Washington. Earlier, Mr. Fischer wouldn't disclose details and wouldn't say if the IMF will speed up disbursement of the next $3 billion installment of aid in return for the new commitments, which are expected to include cancellation of high-profile government spending projects, including some linked to the Suharto family, as well as steps to shore up the banking system and adopt a more sustainable monetary policy.
    There is speculation in Jakarta that the government is considering, among other options, a move toward some form of currency board like those in place in Hong Kong and Argentina. In such an arrangement, Jakarta would back each rupiah with a fixed amount of foreign-exchange reserves, essentially surrendering much of its discretion over monetary policy.
Of course, three months ago, Indonesia won a pledge of as much as $43 billion in foreign loans and loan guarantees from the IMF and others in exchange for promises to shoot for a budget surplus, reduce fuel subsidies, liquidate 16 insolvent banks and reduce its trade deficit. But as the rupiah plunged, pushing scores of Indonesian companies toward bankruptcy, the government walked away from several of its promises.

Jan 14 - Wednesday.
    Asian financial markets on Wednesday added further momentum to their bounce back from Monday's rout, with strong gains in both stocks and currencies. But players said sentiment remained nervous, and further losses could return to haunt markets again."I think that challenges still remain formidable here in the first quarter. I think we'll continue to test new lows in the first quarter," said Eugene Chung, regional strategist at SBC Warburg Dillon Read in Hong Kong. Brokers in Jakarta attributed the three-day rebound to optimism over the IMF-backed reforms, but they also expressed concerns investors could sell on facts when fresh measures are expected to be unveiled on Thursday after talks with International Monetary Fund officials. "You have the classic risk of buy the rumor sell the fact," said John Noonan, head of Proprietary Trading at National Australia Bank Singapore.
    Despite the persistent jitters, a lighter mood held sway on Wednesday morning, with stocks leading the charge and dragging currencies along in their wake. The region's major stock markets -- Hong Kong, Tokyo, Sydney and Singapore -- reported convincing gains, while Asian currencies took heart from visits to the region by U.S. officials. "After talking with the (Indonesian) president, I am convinced that he is determined to put his country on a sound footing and to have a recovery of confidence in the integrity of the country's financial system," U.S. Defense Secretary William Cohen said after meeting President Suharto. The remarks were the latest in a raft of confidence-boosting statements from U.S. luminaries trying to shore up the nation, racked by bad debt and political jitters. They helped to lift the rupiah to 7,000/7,500 from an opening low of 8,300 and fueled anticipation about new steps from the International Monetary Fund to pull the nation back from the brink of an economic implosion. Jakarta stocks closed 5.72 percent higher at 403.98 with the city waiting for IMF chief Michel Camdessus to arrive from Singapore, where he stressed that Indonesia must accelerate long overdue economic reforms. "The immediate priority (of my visit) is to arrest and turn around the tremendous loss of confidence, and stabilize the market through monetary discipline and a dramatic acceleration of long overdue structural reforms," Camdessus said. IMF deputy chief Stanley Fischer left Jakarta on Wednesday morning, sparking speculation that new steps under a IMF plan had already been agreed upon. It was to be made public on Thursday.
    A leaked IMF document has strongly criticized President Suharto for failing to enact promised reforms attached to Indonesia's US$43 billion aid package. The New York Times, which obtained the document, said the IMF conceded in the report that its requirement that 16 insolvent banks be closed as part of the plan backfired, helping to cause the panic that prompted global concern and intervention by U.S. President Bill Clinton.
    Expectations of a resolution to the Indonesian crisis coaxed other currencies higher along with the rupiah. The Malaysian ringgit, the Thai baht, the Singapore dollar, the Philippine peso, the Taiwan dollar and the South Korean won all leapt higher against the U.S. currency. The region-wide gains mimicked the Japanese yen, which firmed against the U.S. dollar on diminishing fears for the nation's banking system, and a corresponding rise in the Tokyo stock market. The benchmark Nikkei 225 index ended 2.48 percent higher at 15,121 -- rising above the critical 15,000 barrier on renewed hope about government plans to shore up the financial sector.  Hong Kong shares rallied to close 5.81 percent stronger at 9,226 boosted by Wall Street's gain of 84 points to 7,732 while Singapore stocks were up 7.50 percent at 1,243.27.  "There's a bit of short-covering going on but there's also institutional buying, mainly in Hong Kong but also in the rest of Asia," said one head trader in Hong Kong. "There's some (institutional) interest in Singapore and Malaysia, but outside of that, it depends what the IMF does."  In Seoul, a 2.46-percent rise in the stock market helped to lift the won, while debate with international bankers continued over management of the nation's massive debt burden. 

Jan 15 - Thursday.
    Indonesia, the fourth-largest nation in the world began a new and risky chapter in its history on Thursday when President Suharto announced wide-ranging  economic reforms that, if carried out, would overturn the country's entrenched ways of doing  business and curb its economic growth.  Capitulating to international pressure, Suharto signed a remarkably specific agreement with the International Monetary Fund that requires him to dismantle the monopolies, the family-owned businesses and his iron control of the economy that have marked his 32 years of rule. It was his second agreement with the IMF in four months -- the last of which he almost completely abrogated -- and some analysts remain pessimistic about the nation's outlook despite Suharto's dramatic concessions.
    Instead of the expected jump, the Jakarta stock exchange slumped by 4 percent Thursday, and the currency, the rupiah, slid 14 percent to settle at 8,650 to the dollar.  Indonesia's new economic reform package failed to impress Asian markets on Thursday, with analysts saying they were still seeking proof that the country would enact tough measures to pull itself out of crisis. Across-the-board strength in stocks quickly faded with Hong Kong leading the way down. Jakarta stocks dipped and the rupiah sagged after two days of gains, helping to take the steam out of a two-day rally that lifted the region from a selling blitz on Monday. "Things are, as yet, unchanged. People are pulling in their horns and waiting for proof," said Marshall Mays, chief strategist with Nikko Securities.
    In the letter of intent signed with the International Monetary Fund (IMF), Indonesian President Suharto drastically revised economic forecasts attached to a recent budget, agreed to cut key monopolies and promised to avoid government bail-outs of debt-laden banks.  "To be really brutal, it looks like a good public relations exercise but there's no action yet," Mays said. Jakarta stocks lost 4.14 percent to close at 387.24 while the rupiah sank back to 8,200/8,500 to the U.S. dollar -- a level unseen for two days as markets rallied in anticipation of the deal. Indonesia has agreed to a "dramatic" acceleration of reforms previously decided together with the IMF.  It will end monopolies on cloves, fuel and all commodities controlled by regulator Bulog except for rice, while also cutting tax benefits for the national car program.  There was also a major revision of economic forecasts contained in the recent budget, which shattered international confidence last week and dragged the region into a vortex. Inflation is now forecast at 20 percent rather than nine percent, economic growth is projected at zero rather than four percent, and the rupiah rate, upon which the budget is based, has been cut to 5,000 to the U.S. dollar instead of 4,000.  Most important, some analysts said, was the suggestion that a one-percent budget deficit has been allowed under the new calculations, implying greater latitude by the IMF on efforts by the government to stimulate real economic growth.  "It's not a turning point, it's the beginning of a very long workout process," ING Barings chief strategist Paul Schulte said of the deal.  "It'll make sentiment less bad. But it may not make the situation all that much better because at current exchange rates the prospects for total debt repayments are very low."
    In Hong Kong, the Hang Seng index shed seven percent to 8,578 as the effects of high interest rates to support the territory's dollar currency link started to snap at the territory's heels.  "Hong Kong, because it's so liquid, continues to be the most sensitive market in Asia," Mays said.  "Hong Kong is reacting to all these bad things, but it has enough bad news in it's own front yard right now."  On Thursday, British investment banking and fund management group Schroders Plc confirmed that 220 investment banking jobs would be lost as part of an Asian restructuring. In addition shares in Sino Land slid on worries about a rise in bad debts following a steep fall in housing prices.  Earlier this week, high-flying investment bank Peregrine Investment Holdings went into liquidation, denting confidence badly in the bustling territory of 6.4 million people. Chief executive Tung Chee-hwa on Thursday sought to calm Hong Kong's nerves, but said the territory's growth rate was slowing and that 1998 would be a difficult year.  Despite the pain of higher interest rates, Tung reiterated Hong Kong's determination to defend the dollar peg, considered an anchor of political and economic stability for 14 years.
    Singapore shares lost nearly one percent on concerns over property companies and their borrowings and the Singapore dollar slumped.  The Straits Times Industrials Index (STII) ended down 9.91 points at 1,233.36. Total market volume was 318.6 million units with 119 gainers against 310 losers. Tokyo was closed for a national holiday.
Seoul was the star performer in Asia on Thursday, striding ahead on news that banks had agreed to roll-over much of the country's short-term debt due by the end of March. Even though uncertainty lingers about the longer-term resolution to South Korea's debt mountain, the won firmed to 1,600 to the U.S. dollar from Wednesday's close of 1,671, lifting stocks by 6.49 percent to close at 505.98.  Volume was 129 million shares on Thursday, the third daily record this week, confirming the strength of a rally that has lifted the main index by 34 percent since the start of the year. 

Jan 16 - Friday.
    Asian markets rebounded sharply Friday, lifted by a 6.1% gain in Tokyo and a 3.7% jump in Hong Kong. But South Korean shares fell after a week of gains. Tokyo's key Nikkei average rose on expectations that the government will do more to stimulate the economy and on signs that other Asian markets are stabilizing. Meanwhile, a technical rebound lifted the Hong Kong market after a massive sell-off the day before sent the Hang Seng Index down  more than 7%.  In Tokyo, strength in bank stocks, as more details emerge of official action to aid Japanese financial institutions, helped buying. News that Prime Minister Ryutaro Hashimoto had hinted during a meeting of his ruling Liberal Democratic Party Friday that the party may consider another round of tax cuts also boosted investors' confidence. Koji Omi, chief of the Economic Planning Agency, told a regular news conference that the government is studying additional economic stimulus measures, though he offered no details.  The Tokyo market rallied almost across the board, coupled with active  buying of banking and steel issues by foreign investors, dealers said.
    In other markets, Indonesian shares rose 6.9%, driven by the rebound in banking, mining and telecommunication shares, as the market started to  react positively to the economic reforms package announced Thursday.  Australia's bourse rose 1.1%, Taiwan rose 0.4%, Thailand rose 5.2%, Singapore rose 1% and Malaysia rose 2.8%. However, Seoul's key index fell 3.5% on a correction from recent sharp gains as well as on fears of more bankruptcies.
    In Seoul, President Clinton's designated Asian financial troubleshooter asked South Korean leaders for more reforms to bolster the faltering economy. Lawrence Summers received assurances from outgoing President Kim Young Sam that South Korea would abide by terms of a $57 billion  International Monetary Fund bailout. And profit-taking, combined with Wall Street's decline overnight, sent Manila's market down 1.8%.
    International lenders on Friday officially completed a plan to roll over South Korean short-term debt through March 31, a source close to the talks said.  "It gives us the time to sit down and work out an agreement with the Koreans longer term," the source said, adding that South Korean foreign exchange reserves have stabilized and were beginning to show some net gain after hemorrhaging before Christmas at a rate of $1.0 billion to $1.7 billion per day.  A fax message sent out Friday from Citibank, one of the coordinators of the international effort to stabilize Korea, informed participants that all the lenders had agreed to the rollover.  "We have received confirmation from all regional coordinating banks that the program to roll over short-term maturities to Korean financial institutions through March 31 is being supported by the banks in their constituencies," said the message signed by Citicorp Vice Chairman William Rhodes. The fax noted David Pflug, an executive of Chase Manhattan Corp. acting as regional coordinator for U.S. banks, advised that all of the U.S. banks were participating.  A South Korean delegation returning to the U.S. over the weekend will meet with the bankers next week at the Citicorp headquarters here. The source said that the lenders have not only been rolling over short-term debt but adding some new funds.   "The situation has reversed itself on a substantial basis," he said. "We have basically stabilized this temporary hemorrhaging."
    Separately, U.S. Treasury Secretary Robert Rubin Friday said he saw some financial stabilization in South Korea and urged Asia's hard-hit economies to implement International Monetary Fund reforms.  "I think it would be fair to say that South Korea and in several other countries [the] situation has coalesced for the moment in the sense that there's been some stabilization," Rubin told public television's "Newshour with Jim Lehrer."   Rubin also said Indonesia must adhere to a harsh reform program agreed with the International Monetary Fund to help its economy regain stability.  "The key for Indonesia is to adhere to that program and adhere to the measures that are contained in that program," he said.  Indonesia last week outlined a new series of economic reforms in a letter of intent to the IMF in an attempt to revive its economy

Jan 18 - Sunday.
    Reaching out to the people in a televised dialogue, President-elect Kim Dae-jung said Sunday the worst is yet to come in South Korea's struggle to overcome its economic problems under restrictions from the International Monetary Fund. "The real ordeal will begin from now on," Mr. Kim said in his first direct dialogue with the public televised live on national networks since being elected. "Frankly speaking, we're just entering a dark IMF tunnel." Layoffs and other hardships resulting from South Korea's economic collapse dominated the two-hour program, dubbed "Let's show the great potential of the South Korean people." The dialogue was a campaign pledge of Mr. Kim, who was elected president on Dec. 18. It was patterned after the "town hall" meetings staged by American presidents. Mr. Kim took questions mostly from seven select panelists representing all walks of life. He also took questions from 200 people on the studio floor and a few people in the streets. Mr. Kim's term will not begin until Feb. 25, but he has already gotten heavily involved in efforts to pull the country out of its economic morass. The president-elect said 1998 will be a "year of harsh trials" and predicted up to one million job layoffs and double-digit inflation. While promising to strengthen the nation's skimpy social safety nets, he appealed to workers to accept layoffs to save the country. He said layoffs are necessary to lure back foreign investors who fled the country.  "It's very much clear that in an era of a global economy, we can't survive without foreign investment. We must change our attitude toward foreign investment. We should welcome it," Mr. Kim said. "By allowing layoffs, we'll lose 20% but save the other 80%. When the 80% get stronger, they will help hire back the 20% who lost their jobs," he said. The president-elect said layoffs are a key to winning foreign lenders' rollovers of South Korea's short-term debt of $92 billion due within a year of less. A South Korean government delegation left Sunday to attend debt rollover and refinancing talks with about 40 international bankers in New York this week.

Jan 19 - Monday.
    After months of unabated pessimism in Asian markets, investors decided to throw caution to the winds and accentuate the positive. Share prices surged across the region Monday, with some of the hardest-hit markets enjoying the strongest gains. In Bangkok, the key SET Index jumped 9.8%, while stocks in Kuala Lumpur soared 9.1%. Elsewhere, shares gained 6.6% in both Seoul and Singapore, 6.1% in Jakarta, 5.7% in Manila, 5.6% in Hong Kong and 1.3% in Tokyo. The pace of the rally caught many by surprise. "Why did this happen? What am I missing?" asked a skeptical institutional salesman in Kuala Lumpur. The answer, analysts and investors say, is that enough good news has come out recently to dispel the doomsday scenarios haunting regional markets. "There are selective signs of some of the worst cases of nerves dissipating," said Hugh Peyman, regional strategist with Kleinwort Benson in Singapore. Visits to the region by senior officials from the U.S. and the International Monetary Fund, signs that Japan is finally moving to fix its economy and Indonesia's willingness to agree to a tough IMF package all have encouraged the optimists. And with Asian markets having fallen so sharply in recent months, the prospect of being left behind when stocks bounce prompted many investors to pile in. Monday's buying was partly powered by big U.S. index players "who can't afford to be left out of a rally," reckoned a Singapore-based fund manager. But many analysts and investors expressed doubts that Monday's surge marks the start of a lengthy rally.
    Investors noted that markets advanced Monday even though the rupiah tumbled more than 10%. Late in the Asian trading day, the U.S. dollar was fetching about 9,400 rupiah, up from 8,450 rupiah late Friday. In the past month or so, a sharp drop by the rupiah or South Korea's won would have been enough to send regional stock markets reeling. But on Monday, even shares in Jakarta advanced strongly. The outlook for Asian markets is becoming harder to predict short term, investors say. In terms of scenarios, "everything is so volatile at the moment, one can almost justify anything," said Hugh Young, managing director of Aberdeen Asset Management Asia. For now, he said, Aberdeen will wait to see whether further market setbacks will give it the chance to buy stocks it likes at lower levels. But with so much uncertainty, "it's a moving target," he conceded. Nilesh Jasani, regional strategist with SocGen Crosby in Singapore, still sees a roughly 75% chance that bad news will knock some regional markets back to their lows of the past few weeks. "I doubt whether [Monday's rally] is going to be sustainable," agreed Elizabeth Soon, a fund manager with Schroder Investment Management (Hong Kong) Ltd. "It's going to be a long road to recovery," and that prospect makes it difficult to chase share prices higher, she added. Analysts and investors predict that the coming months will be more enjoyable for traders than for long-term investors. With any bad news, Monday's gains will come crashing down, reckoned a Singapore institutional investor. "It's all trading right now," said Seow Choong Liang, head of Malaysia research at BNP PrimeEast. "It's a market for traders."
    Indonesia has signaled its commitment to much-awaited bank  reform with the biggest-ever merger in the nation's       private sector, creating a bank with some $5.9 billion  in assets. Banking analysts said Monday it is only the first  such move in the sector and more mergers and consolidation are expected as Indonesia hastens to demonstrate commitment to reforms agreed to with the International Monetary Fund to rescue its ailing  economy and currency.  At least 50 Indonesian banks will have merged  into about 12 institutions by June in the wake of the  reforms, Thomas Suyatno, head of the country's  Private Banks Association said. The merged entity will be Indonesia's largest private sector bank and consist of Bank Internasional Indonesia (BII), Bank Dagang Negara Internasional (BDNI), Bank Tiara Asia and unlisted Bank Sahid GajahPerkasa and Bank Dewa Rutji.

Jan 20 - Tuesday.
    Asia's rally ran out of steam on Tuesday, with the biggest markets consolidating at higher levels while the region's worst underperformer, the Indonesian rupiah, continued to cast a shadow over currencies.  Monday's optimism was obviously fading, with cautious traders describing strength in Tokyo and Hong Kong as consolidation rather than further evidence of recovery.  "We had a very bad kick-off this year, all the markets were down except Korea," said Ambrose Chang, chief investment officer at Daiwa Capital Management.  "I would say the markets were in a technical sort of bear market rally. Now they seem to be consolidating. There's not much on the upside at the moment."  The region's major stock markets in Hong Kong and Tokyo were strong but cautious while clinging on to recent gains.  The Nikkei 225's four-day winning streak slowed with the index closing 104.49 points higher at 16,366.53. The market was apparently taking a breather from a rally that has added nearly 1,600 points to the benchmark average.  "Even if the Nikkei falls by 500 points or so over the next few days, we could still say that the market's tone is strong after four days of sharp rises," an official at a second-tier brokerage said.  The yen slipped against the U.S. dollar to trade at just above 129.  The Hang Seng blue chip index also ended a roller-coaster session 33.28 points stronger at 9,433.70.  "People now reckon the market should probably be fairly trading at about 10,000 so that is why even at these levels they buy quite aggressively," said Percy Au-Young, sales director at DBS Securities.
    Elsewhere, the mood was less confident.  Seoul was suffering once again, with the won falling on dollar demand to settle import deals and stocks weak as profit-taking struck after recent, powerful gains that continued up until mid-morning on Tuesday.  By the close, Seoul stocks had managed to climb back to record a 4.78-point rise at 533.55 but dealers said the outlook depends largely on the result of talks in New York on managing the country's huge private sector debt burden.
    Indonesia's rupiah plunged yet again, hitting 10,600 to the U.S. dollar before bouncing back to 9,650 late on Tuesday as overwhelming corporate demand for dollars continued to hurt.  Dealers said there was little reaction to news that President Suharto was ready to be nominated for a seventh term at presidential elections in March. Instead, they said the focus was on who Suharto would pick to be his vice-president.  Jakarta shares were up 9.011 to 448.039.
    Singapore shares drifted lower, spooked by uncertainties in regional currencies and eroding confidence that Asia would soon start pulling out of its economic crisis.  Selling continued even after Singapore's non-oil domestic exports for December showed a robust 13.3 percent rise year on year. "The market is looking for stability in currencies before further movement. It will ignore other news," said a dealer with a U.S. investment house said.  The key Straits Times Industrials Index (STII) finished at 1,296.91, down 2.28 percent, or 30.27 points. Overall turnover was an active 368 million shares, with losers edging out gainers by 328 to 107.

Jan 21 - Wednesday.
    Indonesia's battered rupiah dragged most Asia markets back into a quagmire on Wednesday.  Strength in Tokyo and New York failed to spill over to the rest of Asia, where nearly every market reacted badly to an early session plunge in the rupiah to 12,000 to the U.S. dollar. The currency closed at 11,600.  "Look, you get bear market spikes and everyone thinks everything's all right and pile in on the back on it, and then, whoops, the rupiah crashes and everyone rushes out again," one head trader said of earlier hopes that Asia was stabilizing. The rupiah hurtled lower on reports that Indonesian corporates were resorting to rupiah payments on U.S. dollar debt, while renewed political jitters added another broadside. Beleaguered President Suharto confirmed he would seek a seventh five-year term in office, perhaps with big-spending technology minister Jusuf Habibie as his vice-president. Callum Henderson, managing analyst at MMS International, said Habibie's reputation for profligate spending flies in the face of the austerity required by a US$43 billion bail-out deal from the International Monetary Fund. There was also concern about his lack of a military background, Henderson said. "Is he the kind of person the market wants because of the IMF terms for austerity, and also does the army want him? These are the issues markets are focused on right now," he said.
    All Southeast Asian currencies sank, as did the South Korean won.
    Stocks were mixed but weak, led by Hong Kong. The territory's blue-chip Hang Seng index closed 1.98 percent weaker at 9,246 with the Indonesia factor neutralizing Tuesday's 1.5-percent rise in New York stocks. Asia also took little comfort in Tokyo's strong performance.  Renewed hopes for economic stimulus measures from the Liberal Democratic Party government lifted the Nikkei 225 index by 317 points to close at 16,684. In other parts of Asia, stocks recovered some early losses to trade mixed late on Wednesday, with Kuala Lumpur slightly firmer and Jakarta recording a 3.52 percent rise due to arbitraging on American Depositary Receipts in key stocks. Singapore's Straits Times Industrials Index was also slightly higher, rising 11 points to 1,308 after trading softer for most of the day.  In South Korea, stocks sank more than five percent as foreign interest dried up and locals took profits. The won followed suit, suffering from the lack of foreign interest.  Bankers in New York said overnight that efforts to restructure South Korea's debt burden may have grown more difficult with the country expected to reject any proposal to raise money through a large bond offering.  South Korea would probably try to negotiate a cheaper syndicated loan with a handful of banks or a series of smaller bond offerings which might be better received by financial markets, the bankers said.

Jan 22 - Thursday.
    The Indonesian rupiah broke down on Thursday, one week after a package  of stiff new IMF-led reforms showed no signs of    alleviating the country's debt and confidence crisis.   Its breathtaking plunge through the 15,000 per  dollar level as spreads widened and interbank activity  dried up sent tremors through other Asian currency  and stock markets.  The currency has lost 60 percent of its value since the beginning of the year, and 80 percent since last July when it was trading at about 2,400 to the U.S. dollar.
Dealers said it clawed back some ground after Bank Indonesia intervened repeatedly, selling dollars  for rupiah at the 14,000 and 13,500 levels. The rupiah was quoted at 12,250/13,250 to the  dollar late Thursday against 11,550/850 late on  Wednesday.  But dealers said the market was still overwhelmingly in favor of the dollar due to a slew of  negative developments in Indonesia.  "People just don't want to quote this currency any  more. There's still a lot of (dollar) buying interest from U.S. funds, Jakarta centers, everywhere. And nobody has any dollars to offer," a U.S. bank dealer   in Singapore said.  The failure of Indonesian authorities to convincingly address the country's corporate debt,  estimated at $65 billion, and growing bank liquidity problems were among the factors weighing down the  rupiah.  Central bank governor Sudradjad Djiwandono said on Wednesday the government would soon  announce guidelines to resolve liquidity and solvency problems in the private banking sector. The rupiah also suffered from uncertainty over the  political outlook after hints Research and Technology Minister Jusuf Habibie, viewed negatively by the  markets, may be President Suharto's preferred  vice-presidential candidate in March polls.
    Most Asian currencies were dragged down by the rupiah's plunge, but at a much slower pace as traders turned wary of coordinated central bank intervention. The Malaysian ringgit hit a morning low of 4.58 to the dollar, but then recovered slightly to 4.5100/200,  still down from its late Wednesday levels of 4.4350/650. The Singapore dollar slithered to 1.7635/85 against the U.S. dollar from 1.7580/30 late on Wednesday and dealers said it was likely to head for 1.7750 soon and then 1.7800. The Thai baht fell to 54.20/30 to the dollar onshore against 53.70/53.75 late on Wednesday. Dealers said offshore baht hit an early low of 55.30  in a knee-jerk reaction to the rupiah's drop. It was at  54.00/50. "The baht would likely follow the rupiah's footsteps offshore. A limited local corporate demand for dollars to pay off foreign debt was offset by new inflow of foreign funds into the Thai stock market," a foreign bank dealer in Bangkok said. The Philippine peso stumbled to 42.25/50 per dollar against its previous 41.90 close as the central  bank kept out of the market after days of indirect  intervention.  Central bank deputy governor Alberto Reyes said the bank would open its one-month lending facility to banks which cut their dollar overbought positions and  would buy bank Treasury bill holdings at market  rates to add liquidity to the system.   The South Korean won fell to 1,736/40 per dollar  from Wednesday's 1,723 close as the rupiah's drop  fanned speculative dollar purchases.  The Taiwan dollar surrendered its early gains drawn from the yen's rise and strong local cash demand ahead of the holidays, as players fretted  about the rupiah.
 The plunging Indonesian rupiah dragged the rest of Asia into a downward spiral on Thursday, pressuring markets across the region and in London.  Asian markets large and small sank as Indonesia's financial turmoil wrecked Asia's immediate outlook and shaved one percent off London's FTSE 100 index in early trade. "All the markets are horrible," said one Hong Kong trader. Tokyo stocks followed New York's one percent decline overnight to end a six-session rally with a 278.73-point decline to close at 16,405.69.  The Dow Industrials sank to 7,794 on Wednesday after International Business Machines warned the Asian crisis would hit earnings. "Everything we get out of the United States now is a public health warning with an Asian tint to it," said one trader. Hong Kong followed Tokyo and New York, with the Hang Seng index closing 3.93 percent weaker at 8,883.73. London followed suit with the FTSE index down 50 points in early trade. The index recovered to trade off 27 points or half a percent at 5.245 later in the session.
    Brokers said Hong Kong's fall was further evidence that the Asian crisis is catching up with the territory, which Britain returned to China on July 1 amid widespread optimism.  Investors in failed brokerage CA Pacific Securities protested outside the Hong Kong government's headquarters, demanding their cash and shares back. The failure follows last week's liquidation of high-flying investment bank Peregrine and is the latest blow for Hong Kong. Traders said confidence was clearly waning as the Asian crisis dragged on and interest rates soared to defend Hong Kong's currency link to the United States dollar -- the last remaining fixed exchange rate in troubled Asia. "Nobody quite knows who's lent what money where and when throughout the whole of the region," the trader said. "Just take Peregrine. They had money in Indonesia, so that brought them down, but interest rates are still high. There are going to be problems, aren't there?" The one bright spot was the yen, which firmed against the U.S. dollar largely due to cross-trading overseas.
    But elsewhere, the Indonesian crisis turned into a millstone hanging around the necks of other Asian markets. Jakarta stocks plunged nearly five percent to 443. In South Korea, the won fell to 1,754 from 1,723. Shares were down by 4.47 percent, or 22.67 points, at 483.99, as locals dumped shares and weaker foreign buying failed to support the index.  In Singapore, the Straits Times index fell 3.2 percent, or 41.91 points, at 1,269.49.

Jan 23 - Friday.
    Asian stock markets moved mostly higher on Friday as the region's currencies stabilized somewhat and investors eyed undervalued stocks. Tokyo stock prices made a strong rebound on bargain-hunting, with firmer futures issues spurring the upturn. The Nikkei 225 index climbed 383.42, or 2.3%, to 16789.11. Other major Asian stock markets edged higher, with Hong Kong's Hang Seng Index rising 36.47 points to close at 8920.20 and Korea's benchmark Composite Index rising 2.87 points to 486.86.
    Indonesian markets also steadied Friday, after both equities and the country's currency, the rupiah, were battered over the past week. Indonesian stocks closed slightly higher on trading of blue chips, with the Jakarta Stock Exchange composite index finishing 7.55 points higher to 450.984. Although the rupiah came under pressure early in Asian hours on Friday, traders said that the selling lacked the aggression seen on Thursday, when the currency was sent spinning to an all-time low of 17,100 to the dollar. In addition, Indonesia's central bank stepped in to sell dollars Friday, traders said. Position squaring brought the U.S. dollar lower during the afternoon, although it rallied slightly in late Asian trading to end at 12,800 rupiah to the dollar, compared with 11,850 rupiah late Thursday in Singapore. Despite the calmer markets, few observers hold out any hope that Indonesia can reverse, or even stabilize, the rupiah's depreciation right away. Some regional analysts argue that the current focus on Indonesia will allow other troubled Southeast Asian economies, including Malaysia and Thailand, vital breathing space in which to stabilize their currencies, but others are not so sure. Recent reports of institutional investors in search of cheap assets buying into local currencies are exaggerated, they said.

 Jan 26 - Monday.
    The Japanese yen remained firm in Asia on Monday, lending strength to financial markets throughout the region.  Reports of upcoming G7 intervention to support the Japanese yen added further weight to the U.S. dollar, already under the gun from allegations that a White House intern was pressured to lie about an affair with U.S. President Bill Clinton.  The U.S. dollar was weak but off its lows at 125.67 yen after London's Independent newspaper reported that ministers from the Group of Seven industrialized nations would intervene to support the yen within a range of 120 to 125 to the U.S. dollar. The yen reached beyond 125 in early trade. In addition to the Clinton scandal, the yen gained on expectations of a rise in Japanese interest rates and hopes for further economic stimulus measures from the government. Those hopes, spurred by fresh calls for a cut in corporate income tax and reports of a share buy-back by five major banks, helped to lift Tokyo stocks 1.69 percent to close above the key 17,000 barrier at 17,073, its highest close since October 24.
Nearly all stock markets gained, while yen strength filtered through many of the region's most beleaguered currencies.
The rupiah held its ground in crisis-hit Indonesia, while South Korea -- also a focus of Asian economic fears -- scored foreign exchange and stock price gains. Under pressure from Indonesia's still-unresolved debt burden, the rupiah ended at 13,000 after opening at 13,500. It hit a low of 17,000 to the U.S. dollar last week. Indonesia's government and the country's indebted companies were in talks with foreign bankers to resolve a huge corporate debt problem, but no early solution was expected as rumors swirled about various proposals from different foreign banks.
    In Hong Kong, the Hang Seng closed 0.60 percent higher at 8,973 after reaching as high as 9,278 in early trade on the expiry of the January Hang Seng index futures contract. But dealers said sentiment remained cautious. "People are worried the currency crisis may deteriorate when the Indonesian rupiah is heading lower and lower every day," said Lennon Chan, executive director at Tai Fook Securities. "And you see long-term interbank rates in Hong Kong still heading higher."
The South Korean won firmed sharply, trading at 1,675 against 1,745 on Friday on exporter sales and renewed hopes of an early conclusion to crucial debt talks in New York.
Finance Minister Lim Chang-yuel said talks with international creditors were likely to be concluded in February.
Japanese bankers on Monday said broad agreement was reached in New York on Friday to convert US$25 billion in short-term debt into government guaranteed loans with longer maturities. Compromise on remaining issues was possible, they said. "Interest rates (on restructured loans for Korea) will eventually settled at an appropriate level," one banker said. "For us, of course, it would be better to get higher interest rates. But given the country risk and market views, there is a reluctance to press for an extremely high interest rate," he added. Optimism about the talks firmed stocks by 1.79 percent to close at 518, although pre-holiday caution pared early gains.
Stocks through the rest of the region also firmed, led by Jakarta's five-percent gain. Buying of heavyweight state-owned firms on arbitrage brought the index to 473 despite continued underlying weakness in the rupiah.
The holiday season depressed shares in Singapore, where position-squaring dragged the main index 0.28-percent lower to 1,256. The Singapore dollar was at 1.7565 in steady trade.

Jan 27- Tuesday.
    Japan and Indonesia dominated Asian financial markets on Tuesday, with the yen steady against the dollar and Indonesia announcing a temporary cessation of debt service and a big shake-up of its private banks. Indonesia insisted it had not declared a debt moratorium, but analysts said a moratorium was already in effect given that many companies had ceased servicing their debts.  "It changes the terms of the discussion (between Indonesia and foreign banks) which until now have been quite civilized and cooperative. Now both sides are not being cooperative," said Marshall Mays, chief strategist at Nikko Research Centre.  Elsewhere, activity was light, with many markets closed or trading for half a day ahead of Chinese New Year and the Eid el-Fitr holidays.
  The Clinton scandal continued to grab attention in foreign exchange markets, with the dollar failing to make a convincing test of the 127 yen level.  The dollar was trading at 126 yen in the afternoon session, still suffering from jitters associated with unconfirmed allegations that U.S. President Bill Clinton tried to pressure a White House intern to lie under oath about an affair. Clinton has denied the allegations, but Tokyo markets were speculating that the woman was ready to give testimony that would damage both Clinton and the dollar. Japanese stocks were mixed, with the Nikkei 225 index losing slight early gains to end 91 points weaker at 16,981. Growing expectations of a series of new economic stimulus measures by the government outweighed negative reaction to the sensational arrests on Monday of two senior Ministry of Finance officials, accused of accepting bribes from banks.  But shortly after the close, Finance Minister Hiroshi Mitsuzuka was reported to be on his way to meet Prime Minister Ryutaro Hashimoto as calls for his resignation mounted in the wake of the scandal.
     The Indonesian rupiah gained ground on news of a major shake-up of the commercial banking industry involving government guarantees for deposits and debts and a commitment to open the doors to foreign ownership. The measures were designed to restore domestic confidence in the private banking sector, which has been suffering from a drastic liquidity crunch as local depositors withdraw funds. The rupiah firmed quite impressively to 11,400 from 12,500 before the overhaul was announced but later pared those gains to trade at 11,900 to the dollar. The unit fluctuated again to close at about 11,200. Rising fears of social unrest in Indonesia as layoffs mount and inflation lifts food prices put a damper on the announcement, which was viewed as the first concrete step by the troubled country along a lengthy obstacle course to recovery. Jakarta stocks closed 0.55 percent stronger at 476 with traders cautious despite buying of banking stocks.
Hong Kong's Hang Seng Index also won some relief from the Clinton scandal, ending three percent higher at 9,252 on hopes for a prosperous Year of the Tiger despite its proximity to Asia's toothless litter of once-roaring beasts.
In Singapore, the market closed early for Asian holidays with many dealers expecting falls unless regional markets take an unexpected turn for the better. Singapore shares picked up 0.29 percent, or 3.62 points, at 1,259.92. News of Indonesia's freeze on corporate debt servicing was just sinking in as share dealers were leaving their desks for the Lunar New Year and Moslem Eid al-Fitr holidays. The market was not due to reopen until Monday, February 2. "Anything could happen in the next five days," said one broker with a large local bank. "The situation in Indonesia and elsewhere could change radically ... I'm making no predictions." Markets in Seoul were closed.
   Indonesia announced new reforms Tuesday to restore confidence in its banking sector, guaranteeing commercial bank obligations and allowing overseas investment in local banks.  The government also announced a freeze on debt payments until a new framework is worked out between international lenders and Indonesian borrowers on how to tackle a crippling private sector overseas debt estimated at $66 billion. Finance Minister Mar'ie Muhammad said the latest reforms included government guarantees for debtors and creditors of the country's commercial banks and a new institution to deal with weak banks. "This is about as good as we could have got, particularly on the banking situation," a Western banking analyst said. But analysts said more details are needed before making an overall assessment of the effects of the reforms. They are part of a package agreed on two weeks ago with the International Monetary Fund after the government was accused of backsliding on an earlier agreement in October. Top officials from private and state banks were called to the central bank, Bank Indonesia, for a briefing on the measures. Some complained, however, that details had been given to the press first -- and apparently in more detail. 
 Banking analysts welcomed the elimination of all restrictions on overseas ownership of Indonesian banks, but some questioned the government's apparent determination to avoid the liquidation of any banks in the system. "I think mergers will solve a couple of the problems but it is not the real solution...bad banks should go out of business," one analyst said.
The government liquidated 16 banks, including some closely associated with President Suharto's family, last November after the initial agreement with the IMF. But family challenges to the move and an apparent reluctance to follow through on reforms sent the country's financial markets into a downward spiral and drastically cut the value of the currency, the rupiah -- throwing much of the private sector into technical bankruptcy. "The government wants to rescue the banking sector and they are buying time...," an Indonesian banking source said. "This is a very different attitude from November. If they had taken this kind of step at the beginning of November, the Indonesian economy would not be in the state it is in today." A senior Western banking analyst said, "I think the very positive thing is that we are seeing something come out, whether we like it or not."  But he said more details are needed on what is covered under the government's guarantee for creditors of commercial banks. Also, what exactly does the government mean by a pause in debt payments? The government has denied the standstill constitutes a moratorium on debt repayment, while an analyst described it as "half and half." "The danger now is that people paying off their debt will stop as a result of the freeze, and that needs addressing," he said.  Radius Prawiro, appointed by President Suharto to oversee the private debt crisis, estimated 228 companies in the country have problems servicing debt. The value of the rupiah has plunged around 80 percent against the dollar since last July, with frantic buying by corporations to cover unhedged overseas debt sending it further down in a vicious circle. Banking analysts said market reaction Monday -- after Chinese new year holidays through much of Asia and Indonesia's Eid al-Fitr break at the end of the week -- would be critical. The rupiah strengthened against the dollar after Tuesday's announcement, but analysts said the central bank faces a "very difficult period" in supporting the rupiah next week.  "Monday could see a lot of pressure on the rupiah. What ammunition does Bank Indonesia have to deal with that?" one analyst asked. "It needs somehow to hold the rupiah. Where the money is to come from is a question, but it needs to have the ammunition to hand to keep this contained," he added.

Jan 28 - Wednesday.
    Tokyo stocks gained in early trading on Wednesday on news of the resignation of the finance minister, but prices ended flat after traders took profits.  The Japanese capital was one of the few places with action since most markets in the region, including Hong Kong, South Korea and Singapore, were closed for Chinese New Year holidays.
    In Indonesia, which proposed a temporary freeze in servicing of corporate debt on Tuesday, markets were open, but trading was quiet due to the regional holiday and ahead of the Eid al-Fitr Moslem festival. The rupiah, which traded at around 2,400 to the dollar in July and fell to a record low of 17,000 earlier this month, was quoted at 9,850/10,800 to the dollar in late trading, up slightly from the morning. The Jakarta stock market closed with strong gains, with the Composite Index up 2.02 percent at 485.94.
In Japan, the news late on Tuesday that Finance Minister Hiroshi Mitsuzuka would quit to take responsibility for a scandal involving suspected bribe-taking by bank inspectors helped to boost the market.  Traders said Mitsuzuka's departure would ease the way for the introduction of economic stimulus steps, brokers said. The key Nikkei 225 average rose as much as 1.6 percent in morning trading, but then fell back. Shares closed down 0.05 percent, or 7.79 points, at 16,973.83.
"The market took the resignation of the finance minister as a 'buy' factor. Traders anticipate the market will further advance as the government's stance on economic recovery is gradually becoming clear," said Hiroshi Arano, general manager of Dai-Ichi Kangyo Asahi Asset Management Co Ltd. A supplementary budget featuring two trillion yen ($16.0 billion) in income tax rebates and additional public works spending was passed by the Lower House of parliament on Wednesday. The dollar maintained its firmer tone against the yen in Tokyo after falling overnight.
Dealers said there was little impact from U.S. President Bill Clinton's State of the Union speech, in which he forecast a fiscal 1998 U.S. budget deficit of just $10 billion and said the budget could balance if discipline was maintained.
Currency exchange dealers said a sex scandal involving Clinton had become less of a factor in the market.
At midday the dollar was at 125.70 yen against its New York close of 125.18/28.

Jan 30 - Friday.
    Asia moved into an uncertain new year on Friday as the Seoul stock market resumed trading with a soaring 7.65 percent gain, while Tokyo stocks shed more than two percent as traders worried that a bribery scandal at Japan's Ministry of Finance.  The Hong Kong, Malaysian, Indonesian and Chinese markets remained closed on Friday to celebrate the Chinese New Year or the end of the Islamic month of Ramadan.
In Tokyo, brokers said that, despite the fall, the market was not overly pessimistic and shares would start rising again, although they could drop again early next week. As allegations continued to emerge against the Ministry of Finance, Japan tapped a little-known lawmaker to take the helm at the embattled ministry.  Prime Minister Ryutaro Hashimoto tapped Hikaru Matsunaga, a former trade and education minister who once briefly served as a public prosecutor, to assume the finance portfolio.  The key Nikkei 225 average ended down 2.27 percent or 386.12 points at 16,628.47, while Nikkei March futures closed down 400 at 16,660. The fall in the Nikkei 225 average was largely due to selling of bank shares and low-priced, domestic demand-related issues, such as steel and construction shares, that were heavily sold late last year, brokers said. Those issues led the index's bull run earlier this month but have been sold in recent sessions, initially because traders were weary of the continued rally. The sales had been accelerated by worries ignited by the bribery scandal, which was uncovered on Monday, brokers said.
    Seoul markets rebounded strongly on Friday on the back of a deal struck in New York to refinance South Korea's short-term debt, but the specter of rising unemployment and corporate failures loomed large. Financial markets responded with unrestrained enthusiasm to the deal which allows South Korea's debt-burdened banks to exchange an estimated $24 billion in short-term, non-trade credits for loans maturing in one to three years.  However, the good news for the markets was accompanied by an announcement by the finance ministry that 10 ailing merchant banks would be liquidated and warnings that unemployment would mushroom as Korea Inc. undergoes International Monetary Fund-supervised restructuring. These developments failed to dampen the stock market, where the composite stock index soared more than seven percent to close up 39.69 points at 558.33 in the first day of trading following the three-day Lunar New Year holiday. News of the debt agreement also provided a lift to the won, which opened strong and closed at 1,525 against the dollar, compared to Monday's close of 1,688.
    South Korea yesterday closed a third of its 30 merchant banks, in the first  significant step towards a restructuring of the nation's ailing financial   industry. The finance ministry shut the 10 merchant banks because it felt their capital  was insufficient compared with their assets. Another four banks could be  shut in March if they do not improve their financial status. A new state  agency will take over the assets and debts of the failed banks and manage  and sell assets to pay creditors.  The merchant banks, specialising in short-term corporate lending, have been at the centre of Korea's financial crisis. Bad corporate loans and sour  investments in emerging markets eliminated the equity of many banks as  foreign creditors called in loans last year.  As the financial strength of banks deteriorated, they cut corporate lending,  triggering bankruptcies among debt-heavy companies. The currency, the  won, dropped late last year as banks scrambled for dollars to pay overseas  creditors. The finance ministry plans to use Won3,000bn ($1.7bn) from public bond  sales to protect merchant bank dep-osits until 2000. Thousands of depositors  have already withdrawn their savings.  The closure of the banks underscores a recent government decision to allow  financial institutions to fail. Two brokerage houses were shut last month and  the government is also planning to sell two commercial banks.   The latest closures had little effect on the Seoul bourse, which rose by a   daily record 7.7 per cent to 558.33 in response to the successful conclusion  of talks with international banks on the rescheduling of $24bn of Korean short-term commercial bank debt.    Some of the banks closed yesterday were affiliated to big business groups,  including Ssangyong, Hanhwa and Shinsegae. Other banks shut included  Gyongnam, Coryo, Samsam, Hangdo, Cheongsol, Shinhan and Kyungil.   Analysts believe other merchant banks could be suspended or go bankrupt  soon if more corporate borrowers collapse under the tough financial  conditions imposed by the International Monetary Fund's $58.5bn rescue  package. Merchant banks enjoyed a boom in the mid-1990s, as they generated easy profits by raising cheap funds abroad and then investing them in high-yield  but risky emerging markets such as Indonesia, Brazil and Russia.
 

February 2 - Monday.
    Asian markets roared into the Year of the Tiger with evidence that foreign confidence in the region was returning.  "It's all over, the Asian crisis. That seems to be the sentiment this morning," said Callum Henderson, managing analyst at MMS International. Stock and currency markets firmed and volumes soared as longer-term, value-oriented funds flooded back into Asia from Europe. Shorter-term portfolio flows from the United States followed along. Currencies were also stronger, firming or consolidating at higher levels as confidence seemed to reappear.  "There are some early signs of confidence coming back or being restored, even though on the fundamentals, nothing has changed," said Ambrose Chang, chief investment officer at Daiwa Capital Management in Hong Kong. A crisis of confidence over Asian economies has been blamed for the region's six-month market pounding, but on Monday, that sense of crisis seemed to ebb a little.
The strength was driven by strong liquidity, and concurred with the region's traditional tendency to rally on the first day after the lunar new year. But analysts confirmed evidence to support the stronger tone.
    Hong Kong stocks leapt 14.33 percent, 1,326.24 points, to 10,270 in their second-largest one-day point gain ever, outdone only by October 29, 1997 when they added 1,705.41 points. Brokers expected share prices to undergo a correction following Monday's hefty gains but many believed a large part of the rise was solid. "Up 14 percent in a day, given the fact that materially nothing has changed in Hong Kong, it is probably overdone," said James Osborn, sales director at ING Barings.  "If the market can hold the gains of today for the next couple of days then you might argue that we settle into that 10,000 to 11,000 trading range that we were in earlier." Buying was across the board with only 50 issues declining against 463 issues advancing. Turnover finished at HK$20.89 billion (US$2.7 billion) compared with a quiet HK$4.0 billion during last Tuesday's half-day trading and last Monday's HK$8.97 billion. The last time it reached such high levels was at the beginning of November last year.
    Tokyo stocks ended a volatile session firmer on Monday, after giving up some gains built on a call by a senior member of the ruling Liberal Democratic Party for a six trillion yen extra budget for 1998/99, brokers said. The impact of policymakers' comments aimed at supporting the market was becoming muted, brokers said, adding they expected the key Nikkei stock average to range narrowly for at least a couple of weeks. The 225-share Nikkei average climbed 148.35 points or 0.89 percent to close at 16,776.82. "From this level, the stock market will not be able to extend gains much in the absence of surprising news," said Mikio Takada, general manager at Nikko Securities Co. Ltd. "We will wait to see if the government actually takes more steps and how much impact the measures will have on the market," he said. On the first section of the Tokyo Stock Exchange (TSE), turnover dwindled to 458 million shares from 743 million shares traded on Friday.
    Singapore shares ended sharply higher on Monday, propelled by firmer regional currencies as Asia confronts its financial woes. The Straits Times Industrials Index ended at its day's high of 1,432.99, up 13.74 percent or 173.07 points. Heavy short-covering and fresh buying of banks and property counters from all fronts spurred the market volume to a dizzying 753.11 million shares, the highest since the regional stock market bull-run in 1993. "Investors liked last week's news from Indonesia, South Korea and Thailand. So the market is playing catch-up," said a dealer with a local bank. But Seoul disappointed, sinking more than four percent as the market consolidated after weeks of strength. The South Korean Composite index closed down 23.70 points at 543.68.
    Still, Asia's fundamental problems were apparent in the region's currencies, with technical support levels for the dollar expected to hold in the Singapore dollar, the Malaysian ringgit, the Indonesian rupiah and the baht. "Unless these levels are broken, the weak sentiment for the regionals will remain because these are seen as key technical levels. The current reprieve may be short-lived," one Singapore-based dealer said. The rupiah was cautious, with intervention at 11,000 to the U.S. dollar keeping rates steady at about 10,500 -- despite a strong rally in Jakarta stocks. The Singapore dollar reached 1.70 before paring gains to 1.722, the ringgit was steady at about 4.23 and the Philippine peso was firm at 41.45 against Friday's close of 42.89. The Korean won was slightly weaker at 1,575 on import deals and dollar shortages at some financial firms.Meanwhile the yen was trading at 126.8 to the dollar. 

February 4 - Wednesday.
    A poor showing by Asian stock markets on Wednesday confirmed early week strength as unsustainable, but declining dollar demand allowed most currencies to trade firmer, market players said.  Investors voted with their feet on Asian stocks, dragging most indices weaker by midday. But Indonesia's debt freeze and South Korea's short-term debt rollover announced last week eased U.S. dollar demand and helped currencies stabilize despite an uncertain outlook. "All the markets went up for one day. Now we're back to the realism that perhaps things aren't as rosy as we thought," said Miles Remington, sales trader at Soc-Gen Crosby Securities. "Markets are going to have economic problems going forward, and economic growth will be under pressure."  Hong Kong stocks ended the session 222.90 points weaker at 10,302.61 while Tokyo shed 140.36 points to 16,882.62. Singapore was slightly higher, up 7.33 points at 1,425.23, but all the smaller markets fell. Jakarta sank 16.86 points to 519.92. Malaysian shares were off 10.55 points at 690.76 following Tuesday's 23-percent gain, which lagged the rest of the region's rally by one day because its markets were closed on Monday.  Pent-up demand after Chinese New Year and stronger currencies explained Monday's rally, said Remington, but the outlook has worsened once again with the corporate earnings season on the horizon in most major centers. Bad earnings would remind investors once again of the economic havoc caused by the Asian crisis, which has yet to play itself out fully, he said.
    But Asian currencies continued to gain ground on Wednesday on a decline in U.S. dollar demand following Indonesia's temporary debt freeze and South Korea's short-term debt rollover -- the events that sparked Monday's run-up in stocks. "Demand for dollars has been somewhat softened by the fact that under these programs, borrowers are being able to roll debt forward and postpone payments, so the bunching of debt and demand for dollars has come off," said Eric Nickerson, managing director of currency research at Bank of America. The Indonesian rupiah led gains, scooting past the 10,000 level to trade at 9,200 in early afternoon. U.S. dollar sales by the central bank and hedge funds boosted the unit, which also won support from a Singapore plan to guarantee letters of credit to allow Indonesia to continue to import key goods. The Korean won also edged lower to 1,595 while Seoul stocks were consolidating, rising just 2.93 points to 547.28. Thin markets were exaggerating the stronger market tone in regional currencies, said Nickerson. Eventually dollar demand would return as debt service payment dates approached -- suggesting once again that Asian currency strength was another sign of heightened volatility rather than recovery. "We may have seen the worst in terms of collapsing currencies, but I don't think we've gone from a linear downtrend to a linear uptrend," said Nickerson. "We're in a transition period where we'll see a lot of volatility depending on when the flows and demand for dollars increase, and on news on corporate earnings."

February 5 - Thursday.
    The Japanese yen dominated trade in Asia on Thursday as it surged to a three-month high, while regional stock markets ended mainly firmer after a quiet day.  "In general there is a feeling the situation has stabilized and the rally in some of the Asian currencies has been a supportive factor for the yen," said Callum Henderson, managing analyst at MMS International. The yen gained to 123.00 against the U.S. dollar after quickly scooting through the 124 level early on Thursday. Improved currency stability eased fears that competitive devaluations and regional economic turmoil would erode Japan's export market share, Henderson said. Continued hopes for further economic stimulus measures also allowed the Nikkei 225 index to end 120 points firmer at 17,003. Overseas traders were reported to be actively buying, continuing a trend that saw overseas participation in the key index rise to 44 percent in January from 35 percent in December as locals sold. "So the expectation is the Nikkei will turn down again," Henderson said.
    Most other Asian markets were quiet and mixed, fluctuating in thin volumes after a collapse in early week euphoria.  Hong Kong ended 1.35 percent higher at 10,442, but dealers said derivatives trading was driving the index and a clear direction had still to surface. Strength returned to some markets in the afternoon, with overseas buying reported in Singapore, which closed up 4.70 percent at 1,492, and Kuala Lumpur, which ended up 3.19 percent at 712 in strong volumes. "Liberalization is a great theory and very good for the economy, but at the end of the day you don't buy economies, you buy companies," one equity strategist said. "Some equities are worth buying, some aren't, but for the market indices to run like this is just plain silly." Jakarta shares sank 1.24 percent to 513. In Northeast Asia, South Korean stocks closed 3.51 percent weaker at 525.  Big shocks were still in store for Asian equities, with as little as one-third of Asia ex-Japan's market capitalization expected to survive in healthy condition, the strategist said.  "Markets will go back down. They over-reacted," the strategist said, adding that corporate earnings would soon unveil some of the worst trouble. Asian currencies continued to show signs of improved stability on Thursday, consolidating at stronger levels with the firm yen allowing most to hold early week gains.  But commercial flows dominated trade while interbank players sat on the sidelines. Southeast Asian currencies were little changed through most of the day with the Singapore dollar at 1.6700 to the U.S. dollar, the Thai baht at 48.50, the Philippine peso at 40.35, the rupiah at 9,000 and the ringgit at 3.96.

February 6 - Friday.
    Asian stocks ended on high ground Friday as investors looked for bargains amid the region's gloomy economic ircumstances. The gains, however, were limited by persistent worries about the Pacific Rim's financial outlook.  Tokyo stocks closed slightly higher as the yen's gains against the dollar prompted investors to bargain-hunt large-capitalized shares, brokers said. But the key stock average was tightly capped by profit-taking amid forecasts that gloomy economic conditions would not likely boost these makers' profits, they said. The key 225-share Nikkei average finished 36.76 points, or 0.22 percent, higher at 17,040.06. The average was trapped in a range between 17,133.87 and 16,980.92. The dollar was trading at 123.50 yen. Nikkei March futures ended 40 points higher at 17,130. "The Nikkei 225 is on the way to a further recovery, but it is now trapped in a limited range," said Masaaki Higashida, a strategist at Nomura Securities Co. Ltd. He also said that large-cap, domestic demand-related issues were not likely to extend gains much in the near future. "When the Japanese economy is retreating, profits in these sectors are not likely to grow much," he said. The Nikkei average was also underpinned by a rebound in bank shares, supported by speculation that an increasing number of banks may use public funds to boost their capital base. Analysts expect that the key Nikkei 225 average to be confined to a narrow range for another few weeks. "The recent moves proved that extending gains above 17,000 is very difficult," said Shinichi Ichikawa, strategist at Credit Lyonnais Securities. "But we'll also have to pay close attention to the recent strength in high-tech issues in New York, which is likely to propel high-techs in Tokyo," Ichikawa said. Turnover increased slightly to 617 million shares on the TSE's first section, from 501 million shares traded on Thursday.
    The Japanese government declared the economy "stagnant" in a  monthly report Friday that offered the darkest assessment of the country's business climate in more than 20 years.  Pessimism in households and corporations has put the brakes on  consumption and investment, and it is uncertain whether economic growth  with accelerate or decline in the near future, the report from Japan's  Economic Planning Agency said.  The report was more negative than December's study, which said the  economy was "stalling." It was the first time the agency had used the term  "stagnant" since January 1975. "As illustrated by recent movements in stocks, a portion of market sentiment  is improving," the agency said. "But severity in household and corporate sentiment is having a negative impact on private consumption and capital investment, and the economy is stagnant."  Akira Furukawa, an Economic Planning Agency research official, said that "stagnant" means economic growth is completely flat.
    Japan's beleaguered banks moved an important step closer to returning to financial health as the nation's lower house of parliament approved a 30 trillion yen ($239 billion) bailout package and Sumitomo Bank Ltd., Japan's second biggest bank, sold $1.8 billion of preferred shares in the U.S. The bailout plan provides 17 trillion yen to guarantee bank deposits and pay for the clean-up of banks that fail. Another 13 trillion yen will be used to buy new preferred stock in Japan's debt-strapped banks, which have seen their capital severely depleted as they've written off bad loans made during Japan's ``bubble economy'' of the late 1980os
    Hong Kong stocks ended the session higher with banks and red chips leading the rally, but the upside on the Hang Seng Index was seen limited ahead of the weekend, brokers said. The Hang Seng rose 43.73 points, or 0.42 percent, to close at 10,485.86, off the morning high of 10,681.87. "Hong Kong is just being bought up on the back of the jump that we saw in Hong Kong stocks in London," said Kent Rossiter, institutional sales manager at Nikko Securities. The Hang Seng London Reference Index rose 202.02 points to 10,644.15 overnight on strong gains by HSBC Holdings. Speculation that Barclays Plc and National Westminster Bank were close to a merger deal fueled banking shares in London. HSBC Holdings rose HK$4.00 to end the morning at HK$199.00. The strong performance of red chips also helped strengthen the Hang Seng Index, said Stanley Ng, research manager at Mansion House Research. "I am still positive about red chips since the last round of sell-off in the sector was irrational and the red chip companies with cash on their hands and good earning prospects looked attractive," Ng said. Properties were firm with funds hunting for quality stocks.
    Indonesia shined Friday, shooting up more than four percent as investors bet that many of the market's indebted companies would be taken over by their foreign creditors. The composite index closed 4.27 percent, or 21.94 points higher, at 535.43 on heavy volume. The market also got a fillip from new government moves to tackle Indonesia's mountain of corporate debt, which stands at $73.962 billion out of a total $137.4 billion in foreign debt. Radius Prawiro, the Indonesian government's chief debt negotiator, said the International Finance Corporation and other banks would provide $42 billion in credit for 42 domestic companies. Prawiro also said the government would move quickly to set up a bankruptcy law in line with the International Monetary fund's requirements.
    Singapore blue chips were chased higher as funds piled into the market, competing to get a bigger first bite of undervalued shares, dealers said. The turnaround in sentiment, helped by the rally in Malaysian issues traded over the counter (OTC), also spurred demand. "I'm surprised the market got this far, ahead of next month's corporate earnings," a dealer with an Asian institution said. "It was more or less herd instinct," he said. Funds had gone underweight on Asia and were making up for it, he added. The key Straits Times Industrials Index (STII) ended up three percent or 44.76 points at 1,536.91. Malaysian stocks traded over the counter drew even more liquidity, spurred by speculation of financial sector mergers, dealers said. Singapore banks and other blue chips saw less action but were broadly sought by funds, boosting the Singapore index. Overall market volume was a hefty 1.3 billion shares with gainers thumping losers 454 to 45.
In South Korea, a landmark agreement making it easier for companies to shed workers as they restructure cheered the financial market.  "The agreement makes me think we have hope for this country," President-elect Kim Dae-jung said. The key composite index on the Korea Stock Exchange closed 2.35 percent, or 12.40 points, higher at 540.45. The won closed at 1556 to the dollar on Friday's against 1605 on Thursday.  

February 9 - Monday.
    Asian markets ended stronger Monday, still riding the surge stemming from last week's Wall Street's rally and spurred on by increased buying by overseas investors.  In Hong Kong, stocks rallied to a sharply higher close, prompted by firmer overseas markets and softer local interbank rates, brokers said. The Hang Seng Index leaped 387.29 points, or 3.69 percent, to end at 10,873.15 points. Sentiment was bullish on China plays. The China-Affiliated Corporations Index of so-called red chips surged 13.15 percent to 1,716.11 while the H-shares index ended 9.37 percent higher at 706.96. Investors were encouraged by renewed confidence in the Chinese economy and eyed the overseas currency B share index in the stock market in Shenzhen, just across the border from Hong Kong. This index surged 10 percent to close at 93.18 points on its first trading day after the Chinese Lunar New Year holiday. Turnover in Hong Kong jumped to HK$13.99 billion (US$1.8 billion) compared with HK$10.36 billion on Friday with only 64 issues declining while 475 advanced. Climbing futures led the charge, closing at a premium to the spot market. "There is a pick-up in activity on the futures market and I think that is probably accounting for a lot of what is happening," said Steven Thompson, chief analyst at Nikko Research Center (HK). Views among brokers were divided as to where the market is heading. Some were confident the Hang Seng Index will break 11,000 points soon while others were more cautious. "I think there is resistance at 10,800. A lot will depend on the next couple of days. Global markets are at all-time highs or not far off," said Miles Remington, sales trader at SocGen-Crosby Securities. "There is still the uncertainty of what is going to happen in the Gulf whilst we are celebrating the rates in Hong Kong at the moment."
    Tokyo stocks ended higher, boosted by overseas investors' buying on expectations of economic action by the Japanese government, but profit-taking sales kept the market's key index from rising sharply, brokers said. The key 225-share Nikkei average ended up 164.94 points, or 0.97 percent, at 17,205.00, after hovering in a narrow range most of the day. The index started climbing shortly before the close to exceed a technical chart point at 17,151.55, igniting hopes it could resume a moderate rally, brokers said. Nikkei March futures ended 60 points higher at 17,190. Futures-related buying pushed up the Nikkei, brokers said. Despite modest gains, the market tone was positive, cheered by buy orders through overseas brokerages, they said. "Foreign investors are buying on expectations of additional government economic steps. That has relieved the market and invited buying by domestic brokerages and individual investors," Nikko Securities general manager Yasuo Ueki said. Buying by overseas traders, which was a driving force in the Nikkei's sharp rebound in mid-January, was likely to continue to be a key factor moving the index for some time to come, Okasan Securities strategist Tetsuya Ishijima said. Market sources said orders placed through 11 overseas brokerages before the start of stock trading on Monday showed a net buying stance of 13.8 million shares. International traders bought bank shares in particular, but they also bought steel and other basic industry issues sensitive to economic conditions, brokers said. "The buying back of bank issues has almost been completed as concerns over Japan's financial system are fading, but now fresh buying is emerging after the Lower House of parliament approved two bills aimed at stabilizing the financial system on Saturday," a trader at an overseas brokerage said. Worries over Japanese companies' performance in the current and next business years kept investors from active trade, brokers said. Economic Planning Agency Minister Koji Omi said on Monday the Japanese economy was stagnant. "Traders are reluctant to buy blue-chip issues actively at higher prices until the companies finish announcing their latest earnings forecasts. Profit-taking in those issues is likely to continue for now," said Kunihiro Hatae, general manager of Tokyo Securities. The Nikkei 300 ended up 3.25 points, or 1.28 percent, at 257.09.
    Singapore shares rose with investor attention still focused on second liners traded over the counter. "There is no bad news to knock the market, so the party just goes on," a broker with a Singapore firm said. Dealers said a firm close on Wall Street on Friday and a lack of bad news over the weekend underpinned market sentiment.  Much of the activity was concentrated on Malaysian stocks traded on the OTC, but some Singapore blue chips also posted solid gains. "I think there is a fear among some investors that they may miss out on the rally," said a dealer. The Straits Times Industrials index was up 6.81 points, or 0.44 percent, to 1,543.72. In South Korea, shares swelled amid Sunday's news the Finance Ministry would complete its liberalization of the country's financial markets to overseas investors. The Seoul composite rose 11.54 points, or 2.13 percent, to 554.24.

February 10 - Tuesday
    Southeast Asian currencies skyrocketed against the U.S. dollar in Asian trading on Tuesday amid indications that Indonesia may peg the value of its currency to the dollar. In late Asian trading Tuesday, the rupiah was propelled to a high of 7,450 to the U.S. dollar, up an astonishing 28% from its level of 9,500 rupiah late Monday, as investors scrambled to buy rupiah with dollars. The rupiah's rise pulled other regional currencies higher. The Malaysian ringgit climbed by 8% against the U.S. currency, while the Thai baht and the Singapore dollar rose by 4% and 2%, respectively. Rumors that Indonesia may establish a currency board -- a system whereby the entire supply of local currency is 100%-backed by U.S. dollar reserves at a fixed exchange rate -- have circulated for weeks. The market had largely dismissed the notion as unfeasible, however, until Monday when Indonesia's President Suharto promised assembled Islamic clerics a mechanism "to determine a certain exchange rate."  Further credence was given to the speculation early Tuesday on reports that the Group of Seven leading developed nations is considering establishing a $16 billion fund to help stabilize regional currencies, market participants wasted little time rushing to cover their short rupiah positions. Short covering refers to purchases made to close out short-sale positions. "People immediately started accumulating rupiah in the expectation of being able to sell them back late at 5,500" rupiah to the U.S. dollar, said Daragh Maher, a regional economist at ING Barings in Singapore. The 5,500 level is being considered as the peg for the rupiah, according to working papers for a peg proposal that were obtained by this newspaper. One trader described activity in the Singapore interbank market as frenzied as the U.S. dollar crashed through support level after support level. "The whole market [in U.S. dollars] just collapsed. Suddenly there was selling from all directions. The market had been long dollars all the while, and now everybody wants to get out at once," said a Singapore-based currencies trader at a German bank.
    But Indonesian stocks skidded 2.2%, as the main index in Jakarta fell 11.553 to 517.701. Much of the selling, though, was tied to in stocks that also trade in overseas markets; the surge in the value of the rupiah made these stocks a better value in foreign markets. Elsewhere, stocks jumped on the currency's gains. Bank stocks were among the biggest beneficiaries. "Indonesia could set up a currency board in the next few days, if there is the political will in Jakarta," said Daniel Lian, regional strategist at ANZ Investment Bank. "But first the Indonesian authorities would have to impose capital controls to prevent capital flight," he said, explaining that fears the rupiah would be turned into a nondeliverable currency had sent market participants hastening to borrow rupiah through the swaps market, sending rates sharply higher.  Although the long-term effects of a currency board on the Indonesian economy are in doubt, leading some pundits to predict the scheme's inevitable failure should it be introduced, the rupiah's rally still sent other regional currencies sharply higher.
    In late afternoon trading in Asia, the U.S. dollar had dropped to 3.56 ringgit, from 3.85 at the close of trading on Monday. The U.S. dollar was also lower against the baht, falling to 46.1250 in late trading, down from 47.90 the previous day. The dollar's drop against the Singapore dollar was more muted, although traders did report significant inflows of assets from foreign funds. In late Asian trading, the U.S. currency had fallen to 1.6310 Singapore dollar from 1.6635 at the close of Asian trading on Monday.  The South Korean won, however, proved immune to the regional euphoria, dropping sharply against the U.S. currency on fears that union opposition to job losses and possible strikes would undermine the country's restructuring program. The U.S. dollar ended trading at 1,584 won, up from 1,558 won at Monday's close.
    The rupiah jumped more than 30 percent at one stage on Tuesday as traders got more excited about the prospect of Indonesia adopting a currency board, or some other system of fixing the exchange rate.  But despite the move, few in the market seriously believed it was a possibility or, even if it happened, that it would work or last. Those with short rupiah positions were simply not willing to take a chance, however, and while volume was fairly thin there was a scramble to cover exposed positions, analysts said. "The best guess is that if it is fixed it will be at 5,000 or 5,500," said Chiang Yao Chye, Head of Asia Pacific Research at CIBC in Singapore. "People are skeptical that a currency board would work but the fear is they will try something. The prospect of something, even if it doesn't last more than a couple of months, means that if you're long dollars you want to get out." The rupiah rallied to 7,000 per dollar from an opening 9,400 and previous close of around 9,700. A currency board system allowed Hong Kong to stave off a speculative attack on its currency last year. The system creates a stable exchange rate because it ensures that every unit of local currency on issue is backed by the equivalent in, say, U.S. dollars -- reserves which Indonesia certainly does not have at the moment, analysts said. Indonesia's central bank governor Sudradjad Djiwandono said after a meeting of top economic policy makers on Tuesday that a proposal to adopt a currency board system was being studied but no decision had been taken yet. The general view among analysts was that with Indonesia's massive economic and debt problems this is no time to try and fix the currency using any sort of system. "They (the market) may not believe it wholeheartedly but they can't risk getting caught long dollars as the view gains strength," said Andrew Fung, Regional Treasury Economist at Standard Chartered in Singapore. There were strong rumors in the market that a decision on some kind of fixed system for the rupiah would be announced as soon as next Monday, traders said. The other factor supporting the rupiah was the fact that interest rates might have to rise drastically to support the currency once it was fixed. "As with all currency boards, they lose control of their interest rates. We're seeing very high interest rates in Indonesia right now. One-year swap points are at 4,000/4,600, which is like 61 percent," said a U.S. bank trader in Singapore. Running a short-rupiah, long-dollar position while interest rates went sky-high would certainly be extremely expensive. "What do you do?" asked one trader. "You get out. None of these positions are particularly big and they'll become very pricey if rates go up even more."
    So the market action on Tuesday was very much a safety play and could quickly unwind if the rhetoric was not backed up with solid action. Crying wolf is not something that impresses financial markets. "Now the market's expecting them to announce a currency board. If they don't it's (the dollar) going to go all the way back up again," the U.S. bank dealer said. But underlying all of Tuesday's action was that adopting a currency board system made little sense. "To introduce a currency board at this juncture ahead of the Indonesian People's Consultative Congress meeting where the election of the vice-presidential candidate is key to the future rupiah direction, and ahead of potential military reshuffle and more riots would be foolhardy," said Thio Chin Loo, strategist at Banque Paribas in Singapore. "It is almost impossible to determine a fair rate under current market conditions to fix a dollar/rupiah exchange rate which would not be a target of speculation."

February 11 - Wednesday.
    Stocks in Indonesia and South Korea fell sharply Wednesday amid fears that the countries could be hit by a mounting social backlash against their economic crises.  Most Asian currencies pared early gains made on Indonesia's moves toward a currency board system to stabilize its rupiah.  Weaker stocks in Jakarta and Seoul failed to deter a rejuvenated Philippine market, where prices surged by nearly 7 percent to a five-month high on the back of a stronger peso and hopes its economic crisis was receding.  "The market is alive," said Irving Ackerman, president at I. Ackerman and Co in Manila.  The Jakarta stock market demonstrated that despite recent signs of recovery Indonesia's crisis was far from over. Traders rushed to sell on rumors that riots had broken out to protest rising food prices and as President Suharto warned that unknown "parties" were seeking to undermine the economy.  "Stocks fell drastically in the afternoon session, but so far people have been selling stocks based on rumors," commented one broker.  The composite index dived 30.09 points to 487.61, a fall of 5.81 percent.  Even a strong performance by the rupiah currency, boosted by the growing likelihood that a currency board will replace  the current exchange rate system, failed to reassure the stock market.  Finance Minister Mar'ie Muhammad told parliament the government was drawing up a framework for such a system and  it would be submitted to the legislature "in the near future."
    South Korean shares also suffered from jitters as a showdown loomed between the country's militant trade union umbrella group and the government. The Korean Confederation of Trade Unions defied a government warning and said it would go ahead with a general strike planned for Friday.  The industrial strife fears spooked foreign investors and sent the main index slumping 3.99 percent, or 21.63 points, to 520.14.
    A different mood prevailed in Manila, though, as the peso's rise against the dollar inspired traders to go on a buying spree. The currency strengthened to 37.568 in early trade against its U.S. counterpart from the previous day's close at 39.28, before slipping back later.  "Dollars are flowing back into this country. There is no question the worst is over, but there may be some rough spots," Ackerman said.  The main index galloped 6.71 percent higher to close at 2,218.32.  Trade elsewhere in the region was generally subdued, with the Tokyo stock market closed for a holiday and the Thai  stock market also on a break.
     Hong Kong stocks edged lower as traders balanced good news in the form of a record high close on Wall Street and firmer Asian currencies against an urge to take profits while the Hang Seng hovered near the key 11,000 level.  Some bought on the logic that an Indonesian currency board would add to the credibility of Hong Kong's pegged exchange rate system. "It would actually be quite good for Hong Kong," said Richard Verin, head of equities trading at CS First Boston.  The Hang Seng closed down 66.26 points, or 0.61 percent, at 10,793.41 after hitting a high of 11,189.80 earlier.  Taiwan stocks put on healthy gains as Tuesday's rise in U.S. share prices injected some fresh impetus.  "Taiwan's investors were looking for a reason to rally their market, and Wall Street gave the reason," said one analyst.  The main index ended 1.70 percent, 145.76 points, higher at 8,713.42.  Malaysian shares drifted lower after brokers said attempts at a rally were dashed by a weaker ringgit.  The composite index closed 0.36 percent, or 2.70 points, lower at 739.87.

February 12 - Thursday.
    A record high on Wall Street failed to impress Asian investors on Thursday, with most stocks trading lower and Indonesian shares shedding more than nine percent on concern over possible unrest and a proposed currency board system to peg the fluctuating rupiah.  The Dow's latest record of 8,314.55 did not inspire Tokyo or Sydney, where stocks ended marginally weaker, while in Hong Kong the Hang Seng Index closed down nearly two percent.  Malaysian shares were also badly hit. Kuala Lumpur's benchmark Composite Index fell 5.7 percent to end below the psychological threshold of 700 points.
    In Jakarta, the composite index shed 45.321 points or 9.29 percent to end at 442.289 on news of more price riots in a West Java town and fears the government's moves to fix an exchange rate for the rupiah would mean more pain for the economy. "The market was really, really bad today," a head dealer said. "Foreigners looked so concerned over the currency board system."  The beleaguered rupiah remained near the 7,000 per dollar level for most of the day, up from a low of 7,800 after the ruling Golkar party named parliamentary speaker Harmoko and Research and Technology Minister Jusuf Habibie as vice-presidential candidates in the March indirect election. Habibie, seen as the front-runner, is considered by economic analysts as a financial maverick.
    In Kuala Lumpur, dealers blamed the fall on a weaker ringgit and profit-taking. The index closed down 42.44 points or 5.74 percent at 697.43, while the ringgit slid back through the 3.70 per dollar level. "U.S. funds seem to have reversed their decision earlier in the week which had taken dollar/ringgit from 3.85 to below 3.50," a European bank dealer in Singapore said. In Singapore, shares also ended lower, the Straits Times Industrials index closing at 1600.29, down 20.96 points or 1.29 percent. "There's a lot of profit-taking by foreign traders after the market surge in the past three days. The fall of the peso also affected sentiment," said Jose Maria Ricardo Garcia, executive vice president at Diversified Securities.
Tokyo stocks ended marginally weaker, as profit-taking sales outweighed buy-backs. The benchmark 225-share Nikkei average closed down 0.18 percent, or 30.16 points, at 17,174.93. In Hong Kong, stocks were tripped up by profit-taking after the Hang Seng Index hit a year-high on Wednesday with regional market trends also weighing on sentiment, brokers said.  The Hang Seng ended down 173.38 points, or 1.61 percent, at 10,620.03 after sinking to an intra-day low of 10,511.48.  South Korean stocks closed lower on worries that a labor strike planned for Friday could lead to a fresh financial crisis, brokers said.  The composite index closed at 512.49, down 1.47 percent or 7.65 points. It had fallen more than four percent soon after opening, but recovered before closing.  "Investors are more concerned that strikes will hurt our credibility with foreigners, making rollovers of debt difficult, rather than the strikes themselves," said Kim Young-bum at Seoul Securities.
    Federal Reserve Board Chairman Alan Greenspan reiterated Thursday there was a small risk that Asia's financial turmoil could spread to other parts of the world and impact the U.S. economy.  In remarks to the Senate Foreign Relations Committee, which largely mirrored his Jan. 30 testimony to the House Banking Committee, Greenspan said he fully backed the U.S. administration's request for extra funding for the International Monetary Fund. "There is a small but not negligible probability that the upset in East Asia could have unexpectedly negative effects on Japan, Latin America, and Eastern and Central Europe that, in turn, could have repercussions elsewhere, including the United States," he said. "Thus, while the probability of such an outcome may be small, its consequences, in my judgment, should not be left solely to chance."  Greenspan noted Asian financial markets remained in a fragile state.  "I should like to stress that the significant degree of volatility that continues to exist in Asian markets indicates exceptionally high levels of uncertainty, bordering on panic.  It is not reasonable to expect that the substantial investments needed to implement meaningful structural reforms can proceed very far until we observe a simmering down of frenetic changes in asset prices and exchange rates," he said. Referring to the administration's request for IMF funding, Greenspan said he hoped the money would not be needed.  "But it is better to have it available if that turns out not to be the case and quick response to a pending crisis is essential." Many in Congress oppose the demand for an additional $18 billion in funding for the agency and have threatened to block it by linking it to anti-abortion restrictions which could undermine support for the legislation.
    The International Monetary Fund said it would relax a key condition of Thailand's economic bailout requiring it  to post a budget surplus in fiscal 1998.  Instead of achieving a surplus equivalent to one percent of gross domestic product, Thailand will be allowed to return a budget deficit of one to two percent of GDP in the year ending on September 30, IMF Asia-Pacific director Hubert Neiss said.  In addition, the IMF will also allow Thailand to ease its high domestic interest rates aimed at warding off speculative attacks on the beleaguered baht "sometime after the currency market stabilises'', he said. An improvement in Thailand's economic outlook had prompted the IMF to allow an easing of the conditions of its $17.2-billion package, he said in an interview.  He said the economy had slowed down to such an extent since the IMF programme began that a continued stringent austerity regime may prompt a new economic crisis.
    Under the bailout pact signed last year, Thailand is required to achieve a budget surplus equivalent to one percent of GDP, about 69 billion baht.  "Because of the stagnation and to avoid a crisis, the IMF believes that a relaxation of the requirement is reasonable,'' a Thai-language transcript of the interview said.  Mr Neiss also rebuffed criticism by some analysts who said the IMF programmes applied to Thailand, Indonesia and  South Korea were not right for the region, saying he was confident Thailand's deal would be successful.  Mr Neiss said he was "satisfied'' with the revised conditions which will restore confidence to the country's battered financial markets.  He also said the IMF had encountered "problems'' in dealing with the previous government of Chavalit Yongchaiyudh, which has been accused of obstructing implementation of the IMF packcage for political gain.
    The official gave a thumbs up to the new government's efforts to avert economic meltdown, saying the economy "would  not return to the same state as it was, as the government has control of the financial system and is creating stability''.  The comments came after a Finance Ministry official earlier yesterday said the IMF had agreed to the relaxation of the crucial budget surplus requirement.  But plummetting government revenues caused by the worst economic slump in memory have made the task all but  impossible despite a stringent belt-tightening exercise imposed by the authorities.  The move comes amid the IMF's second quarterly review of Thailand's progress in applying its rescue package, which  will allow the unblocking of the third segment of the $17.2-billion multinational package. 
    Finance Minister Tarrin Nimmanhaeminda returned last month from a trip to Washington during which he met senior IMF officials, saying they had agreed to a change in the tough bailout conditions and targets.  He had, however, refused to be drawn on which of the myriad requirements would be altered.  The Finance Ministry official said earlier the IMF had relaxed its condition and the government must now not post a deficit. The IMF, he added, was still concerned about the outlook for government revenues in the year ahead.  The official said the IMF had insisted the government's macro-economic policy should still strictly adhere to the terms of the rescue package approved in August.  "The IMF also insisted that interest rates should remain unchanged as the baht is not yet stable,'' he said.  He said the third letter of intent which Thai officials have been working on in cooperation with the IMF had been drafted and forwarded to the IMF yesterday. It will be put to the cabinet for approval on February 24.  It would allow the next disbursement of IMF funds in March. The IMF has so far disbursed $7 billion to cash-strapped Thailand.  IMF officials were not immediately available for comment on the official's comments, which contradicted earlier statements by Thai officials.  The government has been lobbying the IMF to relax the budget surplus condition, saying it was unlikely Thailand could achieve the target.
 

February 13 - Friday.
    Currencies, led by the Indonesian rupiah, skidded early in the day after U.S. and International Monetary Fund officials gave a cool reaction to Indonesia's plans to set up a currency board. But the fall proved short-lived. In afternoon trading, regional currencies surged on comments from U.S. economist Steven Hanke, who emerged from a meeting with President Suharto to declare that the Indonesian leader remains in favor of a currency board. Hanke, a U.S. economist, is an advisor to President Suharto and and been agressively pushing for the adoption of a currency board in Indonesia. Mr. Hanke himself has come under fire as he is Chairman of Friedberg Mercantile Group - a currency trading firm - which, he admitted, smartly profited from speculating against the rupiah and other Southeast Asian currencies in recent months.
    The International Monetary Fund and major economic powers warned Indonesia Friday not to impose a rigid currency regime now, saying it could shake confidence in the world's fourth most populous country.  In his most strident comments on the issue, IMF Managing Director Michel Camdessus said Indonesia should pursue a series of economic reforms before establishing a currency board to fix the value of the rupiah currency. "The failure of a currency board would completely undermine credibility and policy making, and seriously damage the country's growth prospects," Camdessus told the annual meeting of the Bretton Woods Committee, an economists' group. Indonesia won a $40 billion IMF-led bailout last year, but this has failed to restore confidence in the nation's financial market.
    Policy makers fear that failure to stabilize its economy risks spreading Asia's financial crisis to the world. Against the advice of the IMF and major lenders, such as the United States, President Suharto's government has said it will quickly establish a currency board to fix the value of the rupiah. A currency board is an inflexible regime with a fixed exchange rate under which a country issues money only when backed by sufficient reserves. Camdessus said his opposition to the idea has the unanimous backing of the IMF executive board, and his stance was immediately supported by the United States, which until now has refrained from publicly warning Indonesia. "I don't have anything to add," said U.S. Deputy Treasury Secretary Lawrence Summers. "The United States is part of the (IMF) executive board," he told reporters.
At the same meeting, German Deputy Finance Minister Juergen Stark criticized the plan for being premature and breaking the spirit of Indonesia's agreements with the IMF. "I don't see the currency board in line with the IMF program," he said. Camdessus said a number of preconditions must be satisfied before a currency board is implemented. "We are of the strong view that this moment has not yet come in Indonesia," he said. Backers of the currency board idea, similar to systems in place in Hong Kong and Argentina, say it may be the only alternative for Indonesia to restore confidence in its currency and thereby help local companies cope with huge foreign currency debts. But Summers said Jakarta would be wrong to think that it can solve its economic problems through a currency board without undertaking serious economic reforms. "I don't think there is any quick fix," he said. Indonesia received a $10 billion loan from the IMF last year as part of the $40 billion international package to help Jakarta cope with turmoil triggered by a currency crash. It is the third-biggest IMF loan, after a $15.5 billion credit for South Korea at the end of last year and a $12.1 billion loan for Mexico in January 1995. Camdessus warned that introducing the currency board could harm the IMF-led package. Should the board not work properly it could damage programs that are designed to help Indonesia's economy recover, he said. "This is why we believe it would be proper to wait a little bit more to let these reforms take hold," he added.
    The IMF package, coupled with doubts about the government's commitment to the program of economic and financial reforms that underpins the rescue deal, has not only failed to stabilize Indonesia's markets, but has led to civil unrest. Residents and police in Indonesia reported a second day of rioting in the West Java town of Jatiwangi, where a small tile factory and cars were burned, and outbreaks of violence in the coastal towns of Pamanukan and Losari. Indonesians burned shops  owned by ethnic Chinese, attacked churches and set   cars ablaze Friday during protests against rising prices in three West Java towns, residents and police said.  The violence erupted for a second straight day in  Jatiwangi, 90 miles (150 km) east of Jakarta, with  mobs burning a small tile factory and setting cars on  fire, they said. They said riots also broke out in the coastal towns  of Pamanukan, 60 miles (100 km) east of Jakarta,  and Losari, farther east, over rising prices sparked by the fall in the value of the rupiah currency and by a
drought. Residents in the major center of Bandung, 90  miles (150 km) southeast of Jakarta, said troops had been deployed and a number of shops had closed following rumors that students planned to take to the streets.
    Volatility returned to Asian stock and currency markets Friday, as stocks in Tokyo and Hong Kong tumbled and the Indonesian rupiah gyrated. In Tokyo, shares closed at their lowest level in eight sessions amid a slew of bearish factors. Japan's blue-chip Nikkei 225 average fell 383.92, or 2.2%, to 16791.01, extending Thursday's slim 30.16-point loss. Losers outnumbered winners 9 to 2 as 731 million shares changed hands. Traders said international investors were nervous following a 9% slide in Indonesian stocks Thursday. In Tokyo, meanwhile, domestic investors moved to book profits ahead of the end of the fiscal year in March. Investor sentiment also soured following a newspaper report that a Japanese government economic-stimulus plan, planned for release next week, won't include tax cuts. "Today's drop was mainly due to concerns that a supplementary budget will be delayed," said Kosaku Inagaki, a manager of the equity department at Kaisei Security. Another bearish factor was the news that Moody's Investors Service downgraded the credit rating of one Japanese bank and is reviewing the ratings of three other banks for possible downgrades. In Hong Kong, the Hang Seng index plummeted 3.3%, battered by profit-taking and worries about growing unrest in Indonesia and weak regional markets, traders said. The blue-chip Hang Seng Index dropped 345.43 to 10274.60, extending Thursday's 173.38-point fall. Trading volume was valued at 9.35 billion Hong Kong dollars. In other Asian markets, Philippine shares closed 3.3% lower Friday. Malaysian shares fell 1.7%. Elsewhere, Australian shares fell 2.8%.
    Southeast Asian currency markets faced another day of whipsaw trading. Currencies, led by the Indonesian rupiah, skidded early in the day after U.S. and International Monetary Fund officials gave a cool reaction to Indonesia's plans to set up a currency board. But the fall proved short-lived. In afternoon trading, regional currencies surged on comments from U.S. economist Steven Hanke, who emerged from a meeting with President Suharto to declare that the Indonesian leader remains in favor of a currency board.
    Other Southeast Asian currencies tracked the rupiah, mostly ending the day lower against the U.S. dollar. The South Korean and Taiwanese currencies ended higher, however, the won buoyed by the cancellation of planned strikes, and the new Taiwan dollar lifted by suspected central bank intervention. The nomination of B.J. Habibie, Indonesia's controversial research and technology minister, as a vice-presidential candidate had already soured sentiment towards the rupiah late on Thursday. The selling continued early on Friday on remarks made by several officials in Washington on Thursday regarding Indonesia's proposed currency board. Testifying in Congress, Treasury Secretary Robert Rubin and Federal Reserve Chairman Alan Greenspan emphasized the rigid discipline necessary to successfully implement a currency board. Mr. Rubin said that the Indonesian government still needs to "think through" a number of issues before proceeding. Separately, Mr. Fischer said that a number of prerequisites must be met before a currency board could succeed.
    Under heavy selling pressure, the rupiah fell roughly 22% from Thursday's close to reach an intraday low of 9,400 rupiah to the U.S. dollar in early trading on Friday.  The currency rallied smartly, however, after Mr. Hanke, a currency board proponent and adviser to the Indonesian government, emerged from a meeting with President Suharto in Jakarta to declare: "We're moving forward." In late Asian trading, the rupiah recovered to trade at 8,150 rupiah to the dollar, compared with 7,312 rupiah to the dollar Thursday -- far above its worst levels but still showing a 10% devaluation for the day.
    Later on Friday, after the close of trading in Asia, more cautious comments about a currency board emerged. International Monetary Fund Managing Director Michel Camdessus urged the Indonesian government to delay action on creation of a currency board and warned a precipitous move could threaten that nation's economic recovery prospects. Scared off by the extreme volatility and unsure of the potential effect on regional foreign exchange markets of the currency board plan, many participants are currently sitting on the fence.
    "What is very clear is that we will continue to have volatile markets, whatever happens in Indonesia," said Alex Erskine, regional economist at Citibank in Singapore. "Either the rupiah will strengthen towards 5,000 rupiah, or it will weaken again. In either case, rupiah interest rates are very likely to rise, and what happens to the rupiah has a very substantial flow-on effect to other currencies in the region. Volatility is the bottom line," said Mr. Erskine.
    In Seoul, the South Korean won was firm after the decision by workers not to launch a nationwide strike, traders said. A large South Korean labor group scrapped its plan to launch a nationwide strike Friday, citing poor domestic economic conditions that would be further aggravated by such a protest. The won closed at 1,621 won to the dollar, up from 1,625 won at Thursday's close in Asia. The New Taiwan dollar strengthened too, ending Friday's session at NT$32.820 to the U.S. dollar, from NT$32.855 the day before. Elsewhere, the Malaysian ringgit fell sharply at first, in tandem with the rupiah, dropping to nearly 4 ringgit to the U.S. dollar. It recovered to end the day at 3.7350 ringgit to the dollar, compared with 3.7750 ringgit to the dollar late Thursday.
 

February 17 - Tuesday.
    President Suharto fired Indonesia's central bank governor on Tuesday over what banking sources said were policy differences in the face of a standoff with the International Monetary Fund (IMF). Diplomatic and banking sources said Soedradjad Djiwandono was understood to have opposed government plans to create a fixed exchange rate system for the rupiah through a currency board. The IMF, the United States, Germany and Australia have all come out in opposition to such a board, saying developments in Indonesia did not favor it at this time. A statement from the state secretariat said the tenure of Bank Indonesia Gov. Djiwandono had been "terminated with respect." He was replaced by U.S.-trained economist Sjahril Sabirin, who served as a Bank Indonesia director from 1987 to 1992 and then worked with the World Bank in Washington before returning to the Indonesian bank last December. Banking sources expected Sabirin would back the government over a currency board. The IMF has threatened to withhold further money under a $43 billion bailout package it put together in return for an Indonesian pledge to push through sweeping economic reforms.
    Opinion was split over what happens next: whether the government would dismiss the IMF threat and push ahead with some form of fixed exchange rate system, or whether it would at least put the plan on hold. The reaction of the foreign exchange market on Tuesday indicated it did not expect a quick implementation of a currency board. When the idea was pushed strongly earlier this month, the rupiah strengthened to 7,000 against the dollar. The rupiah closed in Jakarta on Tuesday at around 9,400 -- much the same as it has been for several days and the level it was before talk of a currency board hardened. It is the collapse of the rupiah from around 2,400 to the dollar last July that has caused consternation in the government, with corporate Indonesia unable to pay its foreign debts, a virtual collapse of trade, and price increases in basic commodities sparking riots in several areas.
    The idea of a currency board is to peg the rupiah against another currency, most likely the dollar, with economic analysts speaking of a figure of around 5,500. Such a move would help out the debts of the private sector, including major firms owned by members of Suharto's family and close associates. But some banking analysts fear Indonesians would try and cash in their rupiah quickly and wipe out the country's foreign reserves, leaving it worse off than before.  "I still don't see Indonesia, the World Bank and the IMF falling out over this. Thus, the issue of timing will be the saving grace for all parties," a senior Western banker said.  An analyst said the country might end up with "an Indonesian rather than a traditional currency board -- but I don't know what that means."  Suharto, who is expected to be elected unopposed for a seventh five-year term in office next month, has called for talks between currency board proponents led by U.S. economist Steve Hanke, and the IMF.  "There is clearly now standoff," a senior Asian diplomatic observer said. "For Suharto, the ideal situation would be to have the currency board and keep IMF support. I think that's what he wants and he wants them to sort things out."
    Some analysts said, however, the dismissal of Djiwandono as central bank governor -- he would likely have retired after the March presidential election and naming of a new cabinet -- indicated a currency board was on the cards.  Hanke, appointed an adviser to a top-level economic council, gave the hard sell to a currency board system when he addressed a news conference on Tuesday, but he was short on details and gave no indication of timing or an appropriate exchange rate.  William Keeling, analyst with Dresdner Kleinwort Benson in Jakarta, said international investors would assume the lack of a clear explanation for Djiwandono's departure meant that he had opposed a currency board.  "That suggests the imposition of a currency board has been determined by the president and is imminent," he said.
    South Korea agreed to expand its social safety net and raise unemployment benefits in the first quarterly review Wednesday of the country's progress under an International Monetary Fund rescue program.  Social welfare assistance, including income support to people without any income, is to be protected and increased by at least 13 percent in 1998, the review said. The country's budget allocation for the employment insurance fund is to be tripled from 700 billion won to 2 trillion won, it said. The review calls for unemployment benefits to be extended to firms with more than five employees from July 1. Benefits now are required for firms with more than 30 employees.
The minimum benefit level should be increased to 70 percent of wages from 50 percent from March 1, while the minimum duration of benefits should be extended to two months from one month by March 1, it said. The review also called for South Korea to temporarily extend eligibility for unemployment benefits by reducing the minimum period of contribution to six months from one year. The temporary extension would be in effect from April 1, 1998, to June 30, 1999. Labor reform legislation adopted by South Korea last week was in line with the review's requirements to enhance labor market flexibility. These included amending legislation clarifying the circumstances and procedures for layoffs and relaxing restrictions on private job placements and manpower leasing services.
Separately, the International Monetary Fund released a further $2 billion to South Korea Tuesday, bringing total IMF lending to about $15 billion so far out of its $21 billion Seoul rescue package agreed last December. An IMF executive board met on Tuesday for its first quarterly review of the biggest credit offered by the international institution to date. The board expressed approval of measures taken so far by Seoul to bolster the nation's struggling economy, an IMF official said. As a result of the meeting a "further ... $2 billion will be made available immediately," said the official, who declined to be named. "The IMF executive directors expressed satisfaction at the authorities implementation of the program."  The IMF funds to South Korea, which will be disbursed over a three-year period, will be complemented by roughly $37.35 billion in loans from the Asia Development Bank, the World Bank and nation lenders. In total, the loan commitments were near $60 billion.
    Major Asian markets staged a cautious comeback Tuesday, with analysts warning that the regional financial crisis was not yet over.  Hong Kong ended higher on the back of softer interbank rates and firmer markets in Asia, with index heavyweight HSBC Holdings taking the lead. The Hang Seng Index gained 108.00 points, or 1.07 percent, to end at 10,232.03 after five consecutive days of losses. Turnover continued to shrink and finished at a slim HK$6.24 billion compared with HK$7.14 billion on Monday. Brokers said investors were reluctant to enter the market with the situation in Indonesia unsettled. Brokers said the thin turnover indicated sentiment had not fundamentally changed and that the market could head lower. "The downside is still there," said Kent Rossiter, institutional sales manager at Nikko Securities."All you can talk it (Tuesday's market rise) down to is a technical rebound because you can't find a lot of reasons why investors should be buying up Hong Kong, Singapore and Malaysia."
Tokyo stocks finished little changed, as early sales in the banking sector waned, taking some downward pressure off the Nikkei average, brokers said. But most investors were sidelined, awaiting the release of the ruling Liberal Democratic Party's (LDP) economic stimulus steps due out Friday, they said. The Nikkei 225 average rose 15.19 points or 0.09 percent to close at 16,790.71. It briefly slipped as low as 16,587.71. The Nikkei 300 average ended 0.52 points lower at 251.58. "The Nikkei average was firmly capped, as investors started to hold back from buying, expecting that any rise may be slow until the end of March," said Masaaki Higashida, strategist at Nomura Securities Co. Ltd. Many strategists agree that the steps to be unveiled on Friday will not include fiscal steps, and therefore will not be as effective at boosting the Japanese economy as originally expected. But there is some hope Japan may propose bolder steps after a Group of Seven (G7) meeting this weekend. "The market's downside is supported, as investors still have hopes for future pump-priming measures," said Daiwa Securities deputy general manager Kenji Karikomi.
Singapore blue chips racked up modest gains, helped by demand from funds for local and Malaysian stocks despite poor regional sentiment. Dealers said Singapore, like other Asian bourses, shrugged off Indonesia's plans to pursue its currency board plan. President Suharto's firing of Indonesia's central bank governor late on Tuesday also had minimal impact, dealers said. "Local buy program helped the market. That's one reason for the rises," a dealer with an Asian institution said. The key Straits Times Industrials Index (STII) ended at 1,496.90, up 1.04 percent, or 15.35 points.But volumes were relatively thin, with overseas traders still awaiting direction from Wall Street, dealers said.
In South Korea, shares dropped as the country's National Assembly session adopted legislation for labor, corporate and government reform. The Seoul composite lost 5.25 points or 1.1 percent at 471.73.
    Taiwan's financial markets were stable on Tuesday   following the worst aviation disaster in the country's   history, which claimed the lives of the central bank  governor and several key bank officials on Monday.   Patrick Liang Cheng-chin, deputy governor of Taiwan's Central Bank of  China, was named acting governor within hours of the crash of the China   Airlines flight near the country's main airport. The crash left 203 people dead.  As well as the bank governor, Shen Yuan-dong, the accident also claimed the   lives of Chen Huang, head of the central bank's foreign exchange department,  and Chien Chi-ming, the bank's economic research chief.   The government moved swiftly to reassure markets that monetary policy  would remain unchanged. Share prices closed higher apart from those of   China Airlines.
    An announcement has not yet been made on who will succeed Mr Shen. But Paul Chiu Cheng-hsiung, who served as deputy central bank governor before taking up his current job as finance minister, is high on a list of candidates to succeed him.  Mr Chiu, a former academic, is seen as cautious and conservative. That would  dovetail with the bank's culture. "The central bank is a strong institution with a strong sense of mission," said an economic analyst at a US brokerage. "It's not  a personality-driven institution." Fears of a possible policy dislocation were quickly put to rest as the central bank held an emergency meeting of its senior officials before market opening.   Financial analysts said that given the central bank's strong institutional   framework, consensus-led decision-making process and traditionally cautious  approach to monetary policy, the sudden loss of its top official would not   affect the bank's operations.
    Mr Shen steered the economy through Taiwan's first democratic presidential  elections, Chinese missile tests in the Taiwan Strait and the Asian financial crisis during his two-year tenure. He took over as custodian of the country's monetary policy and US$83bn in foreign exchange reserves, among the  world's highest, in March 1996. He was a key figure in Taiwan's financial reforms and in the handling of the currency turmoil that hit much of Asia last year.

    Asia markets had a somewhat mixed day Friday, as Hong Kong closed a volatile session higher and Tokyo traders mostly ignored the long-awaited release of the government's economic package. Hong Kong stocks ended a rocky session moderately higher, with investors uncertain about future direction and unwilling to take any large bets ahead of what could be an eventful period next week. The Hang Seng Index closed 18.52 points, or 0.18 percent, higher at 10,599.79 after tumbling to a low of 10,348.95 in the morning and pushing to a high of 10,671.42 in the afternoon. "Market sentiment is rather fragile but there is somewhat of a positive bias in the market. However, breaking the range is not something that will happen," said Andrew Fernow, head of research at Vickers Ballas. "There still is quite a lot of news to come in the next week or so -- everything from the Iraq situation to Indonesia -- and there is just a wait-and-see approach being taken by traders with volume quiet," he said. Turnover was a slow HK$5.74 billion on Friday compared with HK$10.53 billion on Thursday. "The market is lacking direction and there has been precious little liquidity," said Robert Sassoon, head of research at SocGen-Crosby Securities. "People are sitting on the sidelines waiting to see what will happen, particularly in Indonesia."
    Tokyo stocks climbed by the end of trade, as traders who had gone short before the release of an economic package by the ruling Liberal Democratic Party (LDP) bought back ahead of the weekend and a Group of Seven (G7) meeting on Saturday, brokers said. A draft of the LDP package, which is aimed at boosting the economy, was obtained on Friday morning but contained few surprises and had little impact on the market, they said. The key 225-share Nikkei average closed up 139.76 points or 0.84 percent at 16,756.24. The average briefly fell as low as 16,501.60 and traded weaker for most of the session. Nikkei March futures closed 120 points higher at 16,750. Short-covering was prompted partly because possible foreign pressure at the G7 meeting in London for further efforts by Japan to boost its economy may lead to talk-ups by the Japanese authorities, brokers said. Just after the stock market closed, the LDP released a statement containing the final version of the package. The statement did not contain new fiscal spending. "The impact of the economic package was virtually nil," said Hiroshi Arano, general manager of the investment planning department of Dai-Ichi Kangyo Asahi Asset Management.
    Singapore shares ended softer, but reaction to disappointing trade data for January and expected weak bank earnings was muted, dealers said. They said there was selective demand for blue chips and even banks, in spite of 1997 profits falling 30 percent. "If banks make provisions now while emotions are running high over the region, it is acceptable," a U.S. brokerage dealer said. He said profit taking on banks had waned with some still managing gains. The key Straits Times Industrials Index ended at 1,545.79, down 7.68 points, or 0.49 percent.
    In South Korea, shares picked up, as South Korean President Kim Young-sam gave his final address as head of state. The Seoul composite gained 8.68 points at 522.13.
    Japan's ruling party on Friday unveiled a long-awaited, yet uninspiring, package of measures aimed at supporting the flagging economy and stock market.  The Liberal Democratic Party plan offered none of the fiscal-stimulus spending or tax cuts urged by domestic and overseas critics -- yet the party immediately sought to turn its attention to promises of future steps.  Coming just hours before Finance Minister Hikaru Matsunaga was to leave for a weekend meeting with his counterparts from other major industrial powers, the fourth economic package since October to spur the economy did nothing to answer U.S. and domestic calls for quick fiscal stimuli.  Instead, it vowed aid for crisis-hit Asian economies and focused on such long-expected steps as revaluing land assets held by companies and banks, deregulating firms' share buy-backs, promoting the building of second homes and encouraging private financing initiatives for infrastructure and boosting land liquidity.  "It's almost excruciatingly in line with expectations," said Peter Morgan, senior economist at HSBC James Capel Japan. Financial markets shrugged off the plan, with shares up modestly on other factors and the bond market unimpressed.  LDP policy chief Taku Yamasaki tantalized the public with talk of further steps even as he announced Friday's steps.  Yamasaki said he wants the government to put the LDP plan into action next month and indicated the party will take more action of its own.  "There were comments by LDP members that the party should compile a fifth package" said Yamasaki, head of the LDP Policy Research Council. "I would like to take that into consideration and deal with it and take appropriate steps."  He declined to say what kind of steps he had in mind, but noted that the book closings of most Japanese companies at the end of March were a critical time.
Morgan and other economists agreed that the market's focus was already on what Matsunaga would promise the Group of Seven (G7) at Saturday's meeting in London. After that, the markets expect further fiscal measures, but wonder about the amount and when the government will begin to signal them.  Matsunaga told a news conference he would reiterate to the other G7 finance ministers and central bankers that stimulus measures already undertaken would boost Japan's economy.  The government remains ready to consider further steps, but only after enacting the budget for the fiscal year starting April 1, Matsunaga said.  The head of the Economic Planning Agency, Koji Omi, said the government would craft measures over the next month or two based on the LDP package, but these would not involve revising the fiscal 1998/99 budget.  Yamasaki earlier told reporters a fifth party package would likely not have tax cuts, and Prime Minister Ryutaro Hashimoto told parliament that large tax cuts would pose a problem for the fiscal consolidation program enacted last year. Instead, the LDP focused Friday's package on easing various restrictions and touted measures already taken, such as two trillion yen ($15.8 billion) in income tax rebates.

Monday  February 23.
    Asian currencies lost ground on Monday, with the yen particularly hard hit after criticism of Japan at the weekend from the Group of Seven (G7) leading industrialized countries. Stock markets, however, showed little reaction.  Instead stocks were broadly mixed and trading mostly on local factors. News of a U.N. deal on Iraqi arms inspections and a possible resolution to the Iraqi crisis made no impact.
The Japanese yen skidded through key levels against the U.S. dollar after the G7 singled out Japan for criticism after a weekend meeting. "In Japan, activity is low and the outlook is weak," a statement released after the meeting read, prompting a slide in the yen to 129 before profit-taking helped lift it back to 128.60. "Here we go to 130, 135," said Callum Henderson, managing analyst at MMS International. "We're back to the status quo with tight fiscal policy and loose monetary policy, which is bad for the yen because the economy right now has no hope of recovery." Japanese stocks fell in sympathy, with the Nikkei 225 index down 146.75 or 0.88 percent at 16,609.49. "The strong pressure on Japan from the G7 nations was what we expected. But we still don't believe that the Japanese government will propose fiscal spending anytime in the near future," said Kenji Karikomi, deputy general manager at Daiwa Securities Co. Ltd.
  Asia ignored developments in the Iraqi arms crisis, partly because the United States had yet to accept a weekend deal brokered by U.N. Secretary-General Kofi Annan in Baghdad. The agreement could defuse the threat of a U.S.-led military strike against Iraq, but markets were skeptical. "It's all very well for the U.N. to make an agreement with Iraq but (U.S. President Bill) Clinton seems to want to bomb Iraq anyway," said Henderson. Other Asian currencies sank as traders unwound positions taken on speculation the G7 would intervene. The Thai baht, Philippine peso, Malaysian ringgit and Singapore dollar were all weaker against Friday's levels. Dealers said currencies also suffered on signs Indonesia was backing away from earlier proposals for a currency board, with the rupiah now vulnerable to further losses. The rupiah was trading at 9,350 compared with 8,800 on Friday.
    Asian stock markets were broadly mixed. Singapore was 0.41 percent stronger at 1,552 while Hong Kong soared 85.42 points or 1.60 percent to 10,769 on expectations of a strong earnings report by index heavyweight HSBC Holdings. But some market watchers cautioned that so much optimism has been placed in the company that it could turn in strong earnings and still disappoint investors. "People are really hoping they will beat expectations so if they just meet expectations then it might actually disappoint," said Kent Rossiter, institutional sales manager at Nikko Securities. South Korea gained, with the won at 1,654 compared with Friday's close of 1,660. The currency benefited from a 2.67 percent rise in the stock market to 543.
    Indonesia said on Monday it was still considering implementing a controversial fixed currency exchange rate system despite severe international criticism of the plan.  Finance Minister Mar'ie Muhammad said the final decision on whether to fix the rate of the battered rupiah under the currency board system rested with President Suharto.  "The president will decide when the currency board system will be implemented," Mar'ie told a parliamentary budget oversight committee hearing.  "It's the right of the president to decide. When (he will decide) I don't know...let us wait," he added.  The collapse of the rupiah against the dollar by over 70 percent since last July has caused prices and unemployment to shoot up, forced many Indonesian companies into technical bankruptcy and brought trade almost to a standstill.  Police in central Jakarta on Monday arrested three women leading a demonstration of about 50 people against the rising price of milk.  The government has banned street protests and other gatherings for a week before and after the March 1-11 meeting of the People's Constituent Assembly (MPR), which is set to re-elect 76-year-old Suharto and approve state policy for the next five years.  Indonesia has been hit by violent protests against rising prices over the past few weeks as the nation of 200 million people grapples with its worst economic crisis in decades.  Riots have broken out in about two dozen towns and scores of shops looted and burned. Five people have been reported killed by security authorities in containing the disturbances.  Australia said it will open talks with Jakarta this week on an emergency food aid program.
Mar'ie said he did not know whether Suharto would decide on the currency board system before or after the MPR meets.  "The president has not made any other decision since he instructed parliament and the Finance Ministry to prepare for a currency board system," he said.  He added that if implemented, the currency board would have to be a credible operation or it would collapse. He also said the government would honor all its overseas and local commitments even if such a system were put in place.  The plan has met stiff opposition from leading Western governments, including the United States, and the International Monetary Fund. They have suggested that Indonesia first complete a package of financial reforms.  Mar'ie's comments contrasted with remarks by U.S. Treasury Secretary Robert Rubin who said in London on Sunday he had seen unconfirmed reports that Indonesia had dropped or deferred the currency board plan.  "The only thing I've seen is a published report that they have either deferred or canceled the currency board," Rubin told reporters at the conclusion of a two-day meeting of finance ministers and central bankers from the Group of Seven (G7) top industrial nations.  "We think that is a constructive step," he said, adding that it was vital for Indonesia to follow through on a tough reform program prescribed by the IMF to get the country's ravaged economy back on its feet.
Confusion on what steps Indonesia would ultimately take weakened the rupiah in early trade as dealers worried that the country may be on a confrontation course with major Western powers.  The rupiah fell to a low of 9,400 to the dollar from an open of 8,700/9200 and was last quoted at 9,250/9,450 in the late afternoon.  Dealers said trading died down after Mar'ie's comments as players took to the sidelines because of the confusion.  "I don't know what to do now," said one dealer at a European bank in the city.  The stock market index was up about 1.5 percent in the afternoon as the weaker rupiah opened up arbitrage opportunities in index-heavy stocks which are also listed in London and New York.

Tuesday  February 24.
    Japan's market took a nosedive Tuesday, closing at its lowest level in a month amid doubts about economic reform, but other Asian markets ended mostly flat.  Tokyo shares were battered by doubts that the government will adopt any economic stimulus steps in the near future, brokers said.  Late afternoon news that Moody's Investors Service had downgraded its short- and long-term debt ratings on Fuji Bank Ltd. also dampened market sentiment, they said.  The 225-share Nikkei average dropped 411.49 points, or 2.48 percent, to close at 16,198.00, the lowest level since January 16. Nikkei 225 March futures fell 430 points to 16,160. Brokers said government fiscal steps were needed to shore up the economy. But the government has not officially altered its tight fiscal policy, saying its priority is approval of the main budget for the 1998/99 fiscal year.  "Everyone understands further economic steps are necessary. But the government is not shifting away from its tight fiscal policy officially now," said Kiyoshi Kimura, general manager of the research department at Societe Generale Securities.
    Hong Kong stocks closed largely unchanged after a late spurt as buyers returned to the market hunting for bargains, brokers said. The Hang Seng Index ended down 1.87 points, or 0.02 percent, at 10,683.34, after hitting a low of 10,491.20. Turnover finished at a moderate HK$8.06 billion and brokers said Tuesday had offered little news to trade on following HSBC Holdings and Hang Seng Bank's 1997 results on Monday. The market was seen to be locked in a narrow range in the short-term. "It looks like we have 10,800 as a short-term resistance and sort of 10,400 as the short-term support," Remington said.
    Singapore shares closed a little firmer with dealers reporting some fund buying of selected blue chips. But the market was quieter than in recent days with many people awaiting news of this year's financial results before committing themselves by taking new positions. "There is a mildly positive atmosphere," said one broker with a large local bank. "But we're all waiting for the results season and want to see what will happen with the currencies." The benchmark Straits Times Industrials Index was 9.84 points higher at 1,561.75.  In South Korea, shares were mostly flat. The Seoul composite closed down 2.17 points at 540.89.
About four out of five top business executives in Asia expect the region's financial crisis to get worse before tapering off in two to three years, according to a survey released Tuesday.  Sixty percent of Asia's chief executives blamed Asia's financial crisis on the region's governments and their policies, the survey said. The poll was taken during a three-day Presidents Forum of 140 executives sponsored by BusinessWeek magazine on the Indonesian island of Bali Feb. 20-22. About 84 percent of executives polled expected the market crisis to worsen. Nearly 80 percent expected the crisis to taper off in two to three years, the survey said. "In order to build up the New Asia, we must first admit that we have made mistakes, learn to analyze them deeply, and confront all the mistakes squarely," said Supachai Panitchpakdi, Thailand's deputy prime minister and commerce minister, commenting on the survey. Regional governments "failed to take note of early warning signs such as rising inflation, growing current account deficits and flat exports," he added. Governments could learn from mistakes, including a tendency to underestimate problems and reach over-optimistic forecasts based on unreliable information, he said. He did not name specific countries. 

Wednesday  February 25
    Most Asian markets ended higher Wednesday, as speculation about further Japanese reforms gave Tokyo a much needed boost and overseas traders flocked to buy shares of Hong Kong bank giant HBSC Holdings. But the South Korean market faltered.  Tokyo stocks reversed course by the end of trade, as speculation grew that the Japanese government would eventually bow to pressure to form a supplementary budget to stimulate its economy, brokers said.  Despite remarks by Prime Minister Ryutaro Hashimoto on Wednesday that appear to signify a warming to the idea of temporarily delaying fiscal reforms, brokers said they remained skeptical.  The 225-share Nikkei average closed up 162.64 points or one percent at 16,360.64. At one time, the average briefly dipped as low as 15,932.47. The average last broke below 16,000 more than a month ago.  Nikkei 225 March futures closed 170 points higher at 16,330.  "What the market wants to see most is a clear pledge from Hashimoto that the government will temporarily put aside its fiscal reform plans in order to boost the economy," said Tetsuya Ishijima, chief strategist at Okasan Securities Co. Ltd.  A report on Wednesday in the economic daily Nihon Keizai Shimbun said Hashimoto had suggested early implementation of a supplementary budget for the 1998/99 fiscal year.
    Hong Kong stocks closed higher with banking giant HSBC Holdings driving the advance, fueled by overseas investors, brokers said.  The Hang Seng Index rallied 203.40 points, or 1.90 percent, to end at a session high of 10,886.74. HSBC Holdings accounted for 103.74 points of the rise.  HSBC Holdings climbed HK$8.00 to HK$214.00 and brokers said the share price was to a large extent dictated by the market in London where it closed at HK$209.875 on Tuesday.  "On a book value Hongkong Bank (HSBC) is cheaper than a majority of banks listed in the UK," said David Williamson, director at Indosuez W.I. Carr. "I think you will see a short-term hike of the stock, pushing HK$220, HK$225."  Brokers said HSBC benefited from being an international bank amid the economic downturn in Asia and applauded the bank's decision to take a specific general provision charge as a precautionary measure due to conditions in the region.
Singapore shares rose again, taking comfort from economic data that confirmed what the market said it already knew.
"There are no surprises here," said Lee Yeong Seng, analyst at Nikko Research after studying Singapore's annual economic survey published by the Ministry of Trade and Industry. The survey said Singapore's economic growth in 1997 was 7.8 percent, above the previous official figure of 7.6 percent, and projected 1998 growth at between 2.5 and 4.5 percent, down from an earlier forecast of five to seven percent.  The benchmark Straits Times Industrials Index (STII) was 21.47 points higher at 1,83.22.
    In South Korea, shares dropped. The Seoul Composite lost 24.51 points or 4.53 percent, to close at 516.38. Veteran pro-democracy campaigner Kim Dae-jung was inaugurated president of South Korea on Wednesday, boosting optimism that the country will soon turn around its economic fortunes. But Kim's honeymoon proved short-lived when a few hours later the majority opposition party declared a boycott of a scheduled National Assembly vote on the president's nominee for prime minister. The political dispute weighed on markets.

    Asian stock markets rode the momentum of Wall Street's recent climb to start the week positively on Monday, led by solid gains in Tokyo, Seoul and Jakarta.  Regional currencies also got a boost from the weakening U.S. dollar, which in turn lent further support to share prices. In early morning, the dollar was at 125.35 yen and 1.8058 marks, compared with around 126.10 yen and 1.8180 marks in New York on Friday.

• To restore financial stability and growth;
• To take steps to restore market confidence;
• To convince Indonesia to stick to International Monetary Fund reforms.

    Asia equity markets closed higher, supported by bargain hunting and, in Japan, hopes that national governments might intervene to boost share prices through use of public funds.  In Tokyo, the key 225-share Nikkei average finished up 1.68 percent, or 283.42 points, at 17,131.97, after having suffered a 1.45 percent fall on Thursday partly due to weakness in high-technology issues following U.S. chip giant Intel Corp.'s earnings warning.  The Dow industrials closed down 94.91 points, or 1.11 percent, at 8,444.33 after hitting a day low of 8,405.72 on Thursday. Brokers said the market had absorbed the shock by Friday. "The Nikkei's moves now mostly depend on economic policies," said Nikko Securities general manager Yasuo Ueki. "Futures buying supported by expectations of an injection of one-trillion-yen worth public funds into the stock market led the key index."  The market's hopes for a so-called "price-keeping operation" were based on a report in the daily Mainichi Shimbun on Friday that the government and the ruling Liberal Democratic Party (LDP) were planning to include the use of up to one trillion yen from postal savings and insurance funds to prop up share prices.  Apart from hopeful speculation on the economic package, there were no positive market-moving factors apparent on Friday and the market's upside was limited as selling pressure was strong. The market was also overshadowed by weak earnings by a growing number of firms and widening scandals involving officials of the Ministry of Finance (MOF), brokers said.
    Hong Kong stocks opened lower on Friday following Wall Street's sharp fall overnight but managed to regain ground lost in earlier trading to close up 115.85 points, 1.07 percent, at 10,919.53. Sentiment was still expected to be cautious due to worries about developments in southeast Asia, brokers said.  "People are worried by stability in southeast Asian countries and also fears that U.S. stocks may continue to pull back after yesterday's price drop," said Ben Kwong, director of research at Dharmala Securities. "People are seen turning cautious since Malaysia and Singapore are having bank problems and the Indonesian rupiah tumbled yesterday," Michael Ng, dealing director at Sassoon Securities, said.
    Singapore stocks dropped as fears of renewed regional instability deepened, with shares on the Strait Times Industrial index slipping 8.53 points, 0.54 percent, to end at 1,571.15.  The bulk of Friday's concern centered around the troubled banking sector of neighboring Malaysia, which has been plagued with uncertainty in recent days after national banking giant Sime Bank announced a 1.8 billion ringgit (US$450 million) net loss for the last six months. Customers lined up outside Malaysia's Sime Bank Bhd operations in Singapore early on Friday to withdraw their funds, despite assurances from bank officials that their money was safe.
 

    The U.S. trade deficit rose 10.5 percent to $12 billion in January, up from a revised figure of $10.9 billion in December. Overall exports decreased to $77.3 billion from $79.4 billion in December while imports decreased to $89.3 billion from $90.2 billion.  Economists had been braced for a deficit of $11 billion. Either way, the figures were bad news for the country's trade picture. The January deficit was the highest since the department began the current balance of payments measurement in 1992. The U.S. bond market responded calmly as it digested a buffet of economic numbers released simultaneously, including the Consumer Price Index . The benchmark 30-year Treasury bond was up 1/32 with a yield of 5.89 percent, the same level it had been before the figures.
    Particularly problematic in the trade figures was the United States' goods deficit, which rose to $18.8 billion in January from $17.7 billion the month before. Negating some of the force of that figure was the country's service exports, always a strong component for the United States. The nation experienced a trade surplus in services of $6.8 billion. That figure was unchanged from the previous month, however, and could not keep up with the slowing goods exports. The country's contentious and politically sensitive trade deficit with Japan actually decreased in January to $4.4 billion in January from $5.1 billion the month before.  However, the United States' trade imbalance woes simply moved west as the deficit with China, which is quickly surpassing Japan as the country's largest export thorn, increased 9.7 percent to $4.24 billion. Especially worrisome could be a trend emerging in the nation's trade with Southeast Asia. That region, which is reeling from currency and debt woes, has changed from an eager market for U.S. goods to one more concerned about putting its economic house in order. The goods deficit with the Newly Industrialized Countries (Hong Kong, South Korea, Singapore and Taiwan) increased to $2.2 billion from $800 million the previous month. A decrease in exports of aircraft, computers, semiconductors and automobiles and parts was the reason for the significant change, said Commerce.

Monday March 23.
    Senate Republicans have agreed on compromise legislation to fund and reform the International Monetary Fund, Sen. Chuck Hagel's office announced on Monday.  Senators agreed to a set of specific reforms to make the IMF more transparent and accountable. The compromise also calls for the U.S. Treasury secretary to certify that the Group of Seven major industrial nations have "agreed to use their political clout to push for these changes" at the international lending agency, Hagel spokeswoman Deb Fiddelke said.  Hagel, who chairs the Foreign Relations international economic policy subcommittee, was tapped by the Senate leadership to negotiate an accord. The compromise language is expected to be introduced in the Senate on Tuesday. A draft of the compromise legislation was not immediately available, but aides said it would require the secretary of the Treasury to certify that IMF borrowers comply with international trade rules and banking standards. Hagel's office said the compromise was reached after negotiations with Senate Majority Leader Trent Lott, Appropriations Committee Chairman Ted Stevens, Sen. Mitch McConnell and top Treasury officials.  Hagel, chairman the Foreign Relations international economic policy subcommittee, was tapped by the Senate leadership to negotiate an accord. The compromise language is expected to be introduced in the Senate on Tuesday. A draft of the compromise legislation was not immediately available, but aides said it would require the secretary of the Treasury to certify that IMF borrowers comply with international trade rules and banking standards.

Tuesday March 24.
    Sentiments were uneven in key Pacific equities markets on Tuesday, with the mood on major bourses divided between worries about domestic economic worries on the one hand and a drive to shrug off Wall Street's overnight losses on the other. Tokyo stocks were among the day's losers as news that Japan will not include an income tax cut in an upcoming economic package drove the Nikkei average lower. According to traders, the news accelerated sales by corporate investors aiming to expand their paper earnings ahead of the March 31 financial reporting season. But brokers said a sharp fall in the Nikkei was unlikely, as buying by public funds could float the market in the near future. The key 225-share Nikkei average slid 262.44 points or 1.56 percent to close at 16,606.39 while Nikkei June futures lost 230 points to end at 16,590. Volume was comparatively robust, with 476 million shares traded on the first section of the Tokyo Stock Exchange, up from the 361 million shares traded on Monday.
Overnight, Wall Street's Dow industrials lost 90.18 points to close at 8.816.25, ending its record-breaking run from the week before.
"Sales centered on blue chips, banks in particular, as major corporate investors were dissolving cross-share holdings," said Kiyoshi Kimura, general manager of research at Societe Generale Securities Ltd. "Some were carrying out loss-cut sales in financial stocks." However, brokers were careful to note that that the selling pressure would likely subside within a few days.
"The market pretty much [already] discounted the possibility of the package not including an income tax cut, so I don't expect the Nikkei average to tumble below 16,300," said Masatoshi Sato, manager at Kankaku Securities Co. Ltd.
A major factor in recent trading sessions has been whether the government will in fact make the tax cuts the market believes are needed to boost Japan's deteriorating economy. Late on Monday, secretary-general Koichi Kato of the leading Liberal Democratic Party (LDP) told a news conference that the LDP had come up with the outline of a "large-scale" economic stimulus package, but added that it would not include income tax cuts.  The Japanese business daily Nihon Keizai Shimbun said the LDP plan would be unveiled on Thursday or later in the week.
Brokers said President Boris Yeltsin's dismissal of the entire Russian government on Monday did not appear to have influenced Tokyo stocks, insisting instead that the main attention of Tokyo investors was on upcoming economic plans.
  After hovering around Monday's closing levels for most of the session, Hong Kong stocks sprinted to a higher Tuesday close once the government released better-than-expected land auction results late in the day.  The Hang Seng index gained 51.10 points, or 0.44 percent, to end at 11,645.43. Turnover finished at HK$7.52 billion, nearly unchanged compared with Monday's HK$7.60 billion, with investors eagerly waiting for the land auction. "Interbank rate movements seem to be quite favorable," said Ben Kwong, director at Dharmala Securities. "But on the other hand, fundamental factors remain quite weak to support further upside [trading]." Kwong said the market lacked clear direction and he expected the blue chip Hang Seng to remain locked in a narrow range between 11,500 and 11,800.    Singapore shares ended lower on Tuesday, along with Malaysian stocks traded over the counter, on the lack of buying incentives, dealers said. They said Malaysian Finance Minister Anwar Ibrahim had disappointed the market with a lack of measures to stimulate the economy when he addressed his country's parliament on Tuesday.  "The interpretation is that they are setting statutory rules rather than going for stimulus," said one local broker. "The larder is empty. Today there was no rabbit in the hat."
The key Straits Times Industrials index (STII) closed down 19.90 points, or 1.20 percent, at 1,640.54. Across the Straits, the Malaysian KLSE closed down 3.90 points at 731.89.
Elsewhere in Southeast Asia, Thailand's stock market plunged 13.40 points, 2.66 percent, to 490.27, while Indonesian stocks dropped 2.84 percent, shedding 14.65 points to end at 501.66.

Wednesday March 25.
 Tokyo stocks rose two percent in mid-morning trade as investors were cheered by comments on Tuesday by a senior official of the ruling party on a possible delay in Japan's fiscal reforms, brokers said.  The key 225-share Nikkei average was up 1.84 percent, or 306.30 points, at 16,912.69 in early trade. It briefly rose by two percent earlier in the morning.  A rise in share prices on Wall Street overnight contributed to the rise in Tokyo stocks, brokers said.  On Tuesday, the secretary-general of the ruling Liberal Democratic Party, Koichi Kato, hinted at delaying legally mandated fiscal reforms, a move that would allow Tokyo to introduce bold economic steps in the future, including large tax cuts.
In South Korea, shares picked up. The Seoul Composite gained 1.57 points or 0.31 percent at 510 in early trade. Singapore stocks also opened stronger. The Straits Times index tacked on 6.34 points or 0.39 percent at 1,646.88 in early trade.  The Hong Kong market swelled/trailed off in early trade. The Hang Seng index jumped 100.19 points or 0.86 percent at 11,745.62.

Thursday March 26.
    Indonesia said Tuesday it is close to a comprehensive package of measures to lift the country out of its worst economic crisis in three decades.  Finance Minister Fuad Bawazier told reporters the package of measures is being finalized in talks with the International Monetary Fund. "Let us wait to conclude the talks. It's a very comprehensive package, very wide, touching on macro- and micro- economic issues," Bawazier said. "We will announce it once we reach an agreement." And the World Bank said Tuesday it is coordinating humanitarian relief for the nation of 200 million people and hopes to bring in imports of food and other essentials worth $1.5 billion in 1998-99 (April-March).  The successful conclusion of the talks with the IMF, which include a review of reforms Indonesia has agreed to in exchange for a $40 billion bailout, will bring much-needed funds into the country.
The IMF will release the second $3.0 billion tranche from the bailout package and some $2.5 billion in funds from the World Bank and the Asian Development Bank also will become available. Japanese banking sources in Jakarta said Tokyo plans to negotiate and sign a $1.0 billion trade financing loan in yen equivalent once the IMF review is completed. But the rupiah, which has fallen some 70 percent against the dollar since July, was mostly stagnant after gaining some ground in the morning on the approaching agreement with the IMF.  Spot rupiah ended at 8,600/8,700 to the dollar after rising to 8,550 from an opening of 8,800.
Some dealers said the currency also was stronger because of an interest rate hike. The central bank, Bank Indonesia, raised key interests rates an average of 12.7 percentage points Monday in a move that quickly won IMF praise. The government also scrapped a proposed 5 percent tax on foreign currency purchases after consultations with the Fund.  But the interest rate increase hit the Jakarta stock market, with the composite index closing down 2.84 percent at 501.66 points.
    The new minister for state-owned companies, Tanri Abeng, said the government is actively working to deal with some $74 billion in private foreign debt, which has led to massive loss of investor confidence. "Because the IMF has agreed that the government takes the initiative in solving private debt, we are going to make it compulsory for corporations to report their debts," he said. But he also stressed there was no government bail-out involved and the government is taking no credit risk. "What we want to achieve first is to reduce pressure on the rupiah to allow the currency to recover," he said. "Secondly, we want to give our private companies the chance to resume their business operations, so that economic life can return. Everything is at a standstill now," Abeng said, adding the crucial issue is how to reschedule the debt. 
    Diplomatic and political analysts said relations between Indonesia and the IMF had warmed appreciably in recent days after a period of strain. Indonesia appeared to be back on an orthodox IMF-approved track of reform, while Jakarta also won some concessions from the Fund, including approval to continue subsidies on essential commodities. The World Bank's representative in Jakarta, Dennis de Tray, said the Bank is working on organizing a humanitarian relief program for Indonesia outside of the IMF's $40 billion package. Preliminary figures showed the Bank would have to put together about $1.5 billion of essential imports from donor nations, he said.  These include about $1.0 billion in extra rice imports in the 1998/99 fiscal year, and around $500 million in other food, medicines, syringes and hospital equipment. The collapse of the rupiah from around 2,400 to the dollar last July has sparked sporadic protests over rising prices and unemployment. It threw most companies into technical bankruptcy and brought trade to a virtual standstill.  A steering committee of banks that have lent money to Indonesian companies met in Singapore Tuesday, banking sources said. No details were immediately available but the sources said the talks "were more substantial" than they were previously.
    An initial total of 54 domestic banks will be dealt with by an agency the Indonesian government has set up to rehabilitate and deal with bad banks, Jakarta bankers say.  The bankers, knowledgable about developments at what's called the Indonesian Bank Restructuring Agency, told Dow Jones that specific  plans for dealing with the banks will be unveiled after Indonesia and the  International Monetary Fund revise the terms of an IMF rescue program  for the economy. Agreement on new terms, eagerly awaited by markets, is  expected next week.  The IBRA hasn't made any press comment since it was set up. It is being   run out of a building belonging to Bank Indonesia, the central bank, and  it is headed by Iwan Prawiranata, former president of state-run PT Bank  Bumi Daya, who in January was named a central bank director. The chief  financial officer of PT Astra International (P.ASI), Rini Soewandi, has also been tapped to help run IBRA. According to bankers, the 54 banks already placed under IBRA include  39 privately owned commercial banks, four state-owned banks, and 11 state-run provincial development banks. The 54 banks have been  organized into eight teams, they added.
Some Jakarta bankers speculate that after the new Indonesia-IMF deal is  announced, many of the banks currently under IBRA will be effectively  forced to merge, sharply reducing the total number of Indonesian banks  from about 200 at present. The bankers also believe that dozens of other banks not yet under IBRA will be shifted to the agency's responsibility
soon.   While no details have emerged, a major part of talks between Indonesian  officials and an IMF team in Jakarta has been cleaning up the battered  banking system. Last November, acting in line with the IMF's advice,  Indonesia shut 16 commercial banks, which sparked panic among depositors of many other banks.
    The Tokyo stock market closed nearly two percent higher on Thursday despite tepid interest in a larger-than-expected economic stimulus package, while other regional markets closed flat after weak sessions.
Brokers said Tokyo's rally was mostly due to speculation that the government had been conducting price-keeping operations earlier in the day.
The key 225-share Nikkei average ended up 322.28 points, or 1.93 percent, at 16,980.62. Turnover on the first section of the Tokyo Stock Exchange (TSE) was a lackluster 401 million shares against 490 million on Wednesday.
The impact of the news that the economic stimulus package -- unveiled by the Liberal Democratic Party (LDP) after closing -- would be worth more than 16 trillion yen faded quickly, brokers said.
"The news of a 16 trillion yen package cheered the market, but only for a fraction of the time," said Hiroshi Arano, general manager at Dai-Ichi Kangyo Asahi Asset Management Co. Ltd. "The market wants to see a complete change in policy, and for the LDP to do so, the party needs to delay (legally mandated) fiscal reforms."
He said speculative futures buying could dominate the market by the end of March. On Thursday, Nikkei June futures finished 410 points higher at 16,870.
Some traders expect the government to enter the market in an attempt to try to boost the Nikkei before March 31, when many Japanese firms would use its closing price to estimate the value of their shareholdings. There is speculation that the government may already be taking some price-keeping actions.
Tetsuya Ishijima, chief strategist at Okasan Securities Co. Ltd., said the next focus would be the government's supplementary budget expected to be drafted later this year.
The yen strengthened noticeably against the dollar on the news, leaping to 129.31 from its previous New York close of 128.91/96.
  Hong Kong stocks ran out of steam on Thursday to close lower as the market stopped struggling at key resistance levels to lock in gains, brokers said.
The Hang Seng Index lost 52.75 points, or 0.45 percent, to end at 11,757.88.
"Twelve-thousand proves to be a resistance (point) in the short term," said Alex Wong, research manager at OSK Asia Securities. "I think we will start to consolidate and maybe have some more room on the downside but I think 11,600 would be a good support."
Derivatives-linked trade also drove the market ahead of the expiry of the March Hang Seng Index contract on Monday, brokers said.
  "I think it (Hang Seng Index) will perhaps get to 12,000 by mid-to-early next week if the global markets continue to carry on," said Glenn Lesko, head of sales at ABN-Amro Hoare Govett Asia Securities.
"We are moving up to the end of the quarter and this will be the first good quarter the Asia markets have had in a while," he added. "I think people will want to reflect that they are well invested." Singapore shares closed mixed on Thursday with blue chip trading quiet and second-liners enjoying demand from the retail market, dealers said.

The Straits Times Industrials index (STII) slipped 15.58 points, or 0.93 percent, to end at 1,651.64. Small cap stocks in a wide range of businesses were among the actives.
 Elsewhere in Southeast Asia, Indonesia's Jakarta Composite index soared 28.71 points, 5.7 percent, to end at 532.81 while Thailand's SET continued its fall to shed a further 9.40 points, nearly 2 percent, to end at 470.67.
 

Friday March 27.
    Tokyo stocks closed more than 1% lower Friday amid investor disappointment that a just-unveiled economic-stimulus package didn't include tax cuts to bolster economic growth.The dollar was higher against the yen in late Asian trading. Elsewhere in Asia, Hong Kong shares closed marginally lower as investor hopes for a local interest-rate cut soured amid a lack of support from major banks for such a move. In Japan, the Nikkei 225 average fell 241.36, or 1.4%, to 16739.26. Thursday, the blue-chip index soared 322 points. Losers edged winners 6 to 5 as 309 million shares changed hands. Politicians have repeatedly said that they hope to boost the Nikkei average to around 18000 by the March 31 end of the fiscal year. Since the average closed the last fiscal year at 18003.40, a close below that level would lead to losses on companies' stock holdings. Japan's ruling Liberal Democratic Party proposed an economic-stimulus package calling for spending of 16 trillion yen ($124.22 billion) to boost Japan's moribund economy -- the largest fiscal stimulus package ever in Japan, senior LDP officials said. It exceeded market and media expectations for a package of between 10 trillion yen and 12 trillion yen. But few details emerged during the day regarding what sort of spending the LDP will include in the package because the officials couldn't agree on something else -- whether to alter strict fiscal-reform laws to allow new income-tax cuts to be taken in the future. "Nobody can find out for sure," said Louis Tseng, head of derivatives at Jardine Fleming Securities. Lingering doubts the government will actually move quickly to enact any large-scale tax cuts quickly eroded the market's early gains.
    The dollar was quoted at 129.01 yen, up from 128.47 yen late Thursday in New York. The dollar shook off early weakness in Asia, rising against the Japanese currency amid uncertainty over how much money in the new economic-stimulus package is truly newly-allocated funds, traders said.
    In Hong Kong, the blue-chip Hang Seng index fell 22.38, or 0.2%, to close at 11735.50, extending Thursday's 52.75-point loss."There's a lack of market-moving news," said Jason Tang, a broker at South China Brokerage Ltd. And hopes for a local interest-rate cut have been dashed as banks don't seem ready to cut rates yet, he said. Earnings results from major companies, such as Cheung Kong Holdings Ltd. and its affiliate Hutchison Whampoa Ltd. were announced Thursday after the stock market closed. The good results helped lift shares in early trading but failed to keep momentum going during the afternoon.
    The International Monetary Fund backed an Indonesian proposal to tackle its mountain of private debt on Friday, a day after the country's troubles caused riots in Malaysia in which nine people died.  The IMF said the proposal to cure Indonesia's $74 billion private sector debt, modeled after the plan adopted by Mexico in the early 1980s, had merit but still had to be approved by overseas creditors. Indonesia meanwhile promised to cooperate with neighboring Malaysia in the repatriation of Indonesians who had fled the country to escape the economic chaos or political repression. Eight Indonesians and a policemen were killed in rioting on Thursday when Malaysian authorities began the deportation of hundreds of immigrants detained in camps near the capital Kuala Lumpur.  "We regret that this has happened. We will coordinate and cooperate closely with the Malaysian government," Indonesian Foreign Minister Ali Alatas told reporters after a meeting with President Suharto.
Indonesia and the IMF have been working for almost two weeks to solve the nation's private debt problem, a key step in lifting the nation out of its worst economic crisis in decades. Few details of the debt formula emerged after a meeting between the two sides on Friday, but Hubert Neiss, the leader of the IMF delegation, said it was based on Mexico's Ficorca program.  "The IMF, the Indonesian government, the World Bank and other observers think the Mexican model has merit," he told reporters. "It has some merit because it provides some attractiveness to the creditors and at the same time it limits the financial involvement of the government and that is very important."  But he was reluctant to provide concrete details as to how the plan would be applied to the Indonesian situation, saying that the matter was "between the Indonesian government and the foreign creditors to discuss and come to an agreement."  Indonesia also said it would prepare a draft bankruptcy law by next month in order to revive investor confidence in the economy.
Separately, Singapore Prime Minister Goh Chok Tong announced a trade financing scheme aimed at helping hundreds of Indonesian firms buy vital imports. The scheme will be financed by at least $2 billion originally pledged by Singapore for the IMF's $43 billion rescue package for Jakarta. Indonesia approached the IMF after the rupiah currency plunged last year. The currency has fallen some 70 percent against the dollar since July, causing 30-year highs in inflation, doubling unemployment to about nine million people and bringing trade to a standstill.
    Riots have broken out in the nation of 200 million people because of higher food prices and thousands have sought to escape to greener pastures in Malaysia and Singapore. Malaysia began its deportation program of illegal Indonesian immigrants on Thursday and said the operations would be carried out despite the detention camp rioting in which the country said eight Indonesians and a policeman were killed. Malaysia has said some 17,000 Indonesian migrants have entered the country illegally to seek a better life since the start of the year, when the Indonesian economic crisis deepened.

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