Asian markets stage a comeback as IMF rethinks rescue conditions for Indonesia

Asian markets staged an impressive recovery yesterday, with those that had fallen the most making the biggest comebacks. However, as one ratings agency explained why it had misjudged the crisis, no one was viewing this turnaround as anything more than a blip. Stephen Vines reports from Hong Kong.

Asian markets recovered some poise yesterday, helped by Wall Street's bounce-back and hopes that International Monetary Fund-backed reforms would be firmly embraced as the only sure way out of the financial turmoil. Indonesia led the way, with share prices closing 8.5 per cent up as the government moved close to an agreement with the IMF, which yesterday eased the terms of its tough austerity programme.

The IMF's deputy managing director, Stanley Fischer, said President Suharto of Indonesia had agreed to "strengthen" the terms of the IMF package, without giving details. In return, the IMF will no longer require Indonesia to have a budget surplus, sparking expectations the IMF may be more receptive to changes in the conditions it imposed earlier.

Lawrence Summers, the US Deputy Treasury Secretary, said after his meeting with President Suharto: "It's clear that President Suharto recognises the need to take strong steps of the kind that have been under discussion with the IMF to create confidence and to build on the very strong foundations for prosperity that Indonesia enjoys."

The comments came as the IMF rescue package faced a fresh threat from an unholy alliance of left and right-wing politicians in the US hostile to America funding a bail-out programme. The Federal Reserve chairman, Alan Greenspan, was heckled for defending US aid to Asia by activists at a meeting at a Los Angeles community centre.

Yesterday also brought a mea culpa from Fitch IBCA, one of the main credit ratings agencies, which admitted it had underestimated the seriousness of South Korea's problems until it was too late. The agency's report said: "The lessons for rating agencies - and indeed for international financial institutions such as the IMF - are profound because Asia-Pacific represents a new form of sovereign crisis."

The oversight had been to ignore the fact that a high proportion of South Korea's debt was very short term because its total level of indebtedness was low - lower, for example, than Canada, Sweden or Australia. However, the structure of the debt turned out to matter because of the weakness of the Korean banking system when confidence in its solvency crumbled.

Fitch IBCA also criticised the Korean authorities, saying they seemed to have been in "psychological denial" about the crisis and failed to take suitable actions.

In Hong Kong, shares were also up almost 7.5 per cent as interbank rates eased and the market showed it was ready to discount the collapse of Peregrine Group, Asia's largest home-grown financial conglomerate, which was placed in the hands of liquidators Price Waterhouse yesterday.

There were emotional scenes in Hong Kong when the founders of Peregrine described how the Indonesian crisis had brought it down. "What happened was a complete meltdown in a country," Peregrine's chairman and co-founder Philip Tose said, his voice quivering.

Peregrine's managing director Francis Leung, tears streaming, said he hoped to keep helping China-related firms raise capital. Speaking in public for the first time since the collapse, Mr Tose confirmed the group's problems centred on Indonesia, where it was hit by a bad short-term loan totalling $265m (pounds 164m) to a transportation company.

Meanwhile, the Hong Kong market was buzzing with rumours that Mr Leung was talking to a number of mainland Chinese companies about taking over the still-profitable stockbroking parts of the group's business. Mr Leung refused to comment. Price Waterhouse said there was significant interest in buying parts of the Peregrine business.

While Hong Kong shares were staging a recovery, a note of caution was issued by Moody's, the credit rating agency. It said that it had put a watch on the ratings of the territory's biggest bank, Hongkong Bank, and its sister bank, the Hang Seng Bank, as well as Bank of America.

Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer was final surviving member of seminal punk band
Life and Style
Swimsuit, £245, by Agent Provocateur

Diving in at the deep end is no excuse for shirking the style stakes

The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
German supporters (left) and Argentina fans
Final gives England fans a choice between to old enemies
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Yaya Touré has defended his posturing over his future at Manchester City
Detail of the dress made entirely of loom bands
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Network Engineer (CCNA, CCNP, Linux, OSPF, BGP, Multicast, WAN)

£40000 per annum: Harrington Starr: Network Engineer (CCNA, CCNP, Linux, OSPF,...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice