Rioting alarms Asian markets

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RENEWED rioting in Indonesia, met with a sharp crackdown by the authorities, sent tremors through the Far East markets yesterday as investors grew alarmed about possible contagion from a political meltdown.

This week's political and financial jitters in the region have put the Asian turmoil firmly back at the top of the agenda of G7 finance ministers meeting in London today and tomorrow.

The concerns spilled over to London and New York. The FTSE-100 index ended 54 points lower at 5,938, while at midday the Dow Jones Industrials index was 42 points down at 9,012.30 and heading for the 9,000 barrier.

These followed a fall of 101 points in Japan's Nikkei 225 share price index to 15,143.03 and a 137 point, or 2 per cent, drop in the Hang Seng index to 9,971.93, below the psychological barrier of 10,000.

In Hong Kong concern about Indonesia was coupled with rumours of a possible devaluation of the Chinese currency.

Fears of a devaluation have been over hanging the markets for some months. Yesterday's jitters were sparked by reports of a paper delivered by the chief economist of the People's Bank of China, the country's central bank, suggesting that the country would face economic problems unless the yuan was devalued in the second half of the year.

These suggestions fly in the face of repeated assurances by Chinese leaders that there is no question of devaluation. Yesterday Tung Chee-hwa, Hong Kong's chief executive, joined the chorus, telling an international conference that China would stick to its policy.

The Indonesian currency fell quickly when trading began yesterday, dropping to below 10,000 against the dollar, although it picked up to 9,300 by the close. This still represented a dive compared with its 8,850 level on Wednesday.