South East Asian main exchanges braced for more volatile trading

South east Asia's financial markets are braced for volatile trading this week after regional currency turmoil took a toll on stock prices which plumetted on massive redemption by foreign funds.

Dealers said all eyes would be on the Malaysian ringgit, Indonesian rupiah and the Thai baht, all of which slumped to record lows against the US dollar last week, amid speculation the currencies had not reached a rock bottom level yet.

Today is a holiday in Malaysia, which marked 40 years of independence yesterday, and in the United States, where the Labour Day holiday means that all financial markets are close. The absence of Wall Street today only adds to the general air of uncertainty, said analysts.

But as Kuala Lumpur and New York had helped set the pace in South East Asian stock and currency trading last week, the thin market today could cause greater volatility to the region's already bruised markets, analysts said.

"Thin trading conditions can actually exacerbate the volatility," said Mr Andy Tan, general manager of US research house Standard and Poor's MMS in Singapore. Analysts said it would be difficult to pinpoint which of the regional currencies would come under attack this week as none of them were spared since South East Asian foreign exchange turmoil erupted with the Thai baht float on July 2nd.

"There seems to be a pattern of rotational attacks on regional currencies. It would probably be futile to try to second guess which currency will fall prey this week," Mr Tan said. The ringgit tumbled to a new record low of 2.9620 against the US dollar on Friday before recovering to 2.9000, while the rupiah plummeted to an all-time low of 3,050 before ending at 2,957.

The Thai baht also dipped to a record low of 34.50 before recovering a little to end at 34.20, while the Singapore dollar dived to a 38month low of 1.5370 on Friday before closing Asian trading at the 1.5115 level.

Malaysia's imposition of share trading curbs to shore up the stock market, coupled with warnings by the Prime Minister, Mr Mahathir, of more such controls to check what he termed manipulation by foreign fund has already taken a toll on neighbouring Singapore shares.

Foreign investors also started bailing out from regional stock markets fearing other countries would emulate Malaysia and impose more capital and foreign exchange controls to check currency and share price slides, analysts said.