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Mobashar says Indonesia faces deeper crisis

Investors in Indonesia kept their figures across as more comments brimming with optimism were made. The International Monetary Fund's deputy director for Asia / Pacific said he was optimistic of a positive outcome for a long awaited review of the embattled country's economic reforms.

He is heading a twelve day mission, which will determine whether the country receives a $ 400 million loan delayed since last December. The loan is needed to trigger part of a $ 5.80 billion debt rescheduling deal, agreed last year with the Paris club of official creditors.

Mobashar Ahmed said with a weaker rupiah, high interest rates and fears of a ballooning fiscal deficit, Indonesia faces a deeper crisis if it fails to resolve its differences with international donors.

Taiwan bucks the trend

Technology stocks in Taiwan and South Korea bucked the market trends on Tuesday, propelling their respective benchmark indices to solid gains, but other regional markets drifted.

Taiwan's electronics blue chips were led higher by United Microelectronics Corporation, which shot up the daily seven percent limit on positive earnings news, on intensive buying up by state and foreign funds.

The heavy buying in Taiwan spilled over into Korea's major chip maker Hyundai Electronics Industries, which rose by its upper daily limit on a rumoured joint venture and helped drive the benchmark composite Stock Price Index 3.20 % higher.

Broader Asian performance was mixed, as a stable overnight session on Wall Street failed to give investors a clear buy signal. Tokyo stocks were modestly higher and the yen was firm against the dollar. At 108.20 in late trade as investors remained wary about the direction of the euro ahead of a Group of 20 (G20) meeting due to start in Montreal, Canada.

Hong Kong's blue chip index ended below its 15000 point support level on Tuesday down more than 1 % as the market was dragged lower by an eleven percent slide in pacific Century Cyberworks stocks. PCCW shares fell to a new 52 week low as investors' nervousness over the company's plan to raise up to US$ 1.80 billion in shares and bonds.

PCCW's share finished down 11.50 % at HK$ 5.75 after dipping to a new 52 week low of HK$ 5.70. Its shares slide accounted for more than one third of the index fall.

Fund managers said they remained cautious about the market's short term outlook after the index's recent volatility. The Hang Seng is still into a corrective phase and in the short term, we are still looking at the oil price and Middle East tensions.

Asia's emerging currencies took some respite from improving equity markets and a steadier yen, but remained mixed in weak ranges on lingering worries over high oil prices and an expected slowdown in global growth.

The Taiwan dollar and the Korean won posted moderate gains as equity prices surged but the Philippine peso hit a record low and the Thai baht slid to 31 month lows early in the day.

Mobashar Ahmed said investors are, in general, demanding greater risk premiums in Asia as capital inflows dwindle on growing internal and external risks, which could push interest rates up. The combination of US stock market volatility, weakening regional currencies, high oil prices and political uncertainty threaten to undermine the strength of foreign capital flows to Asia.

The Thai government will not interfere with the Bank of Thailand's handling of the battered baht, which touched a 31 month low on Tuesday, Thai finance ministers said. The baht has been suffering at the hands of its neighbours as dealers use the currency as a proxy for the less liquid Philippine peso and the Indonesian rupiah.