The financial crisis in the Far East shows no signs of abating with shares plunging in Hong Kong and the Indonesian currency in freefall.

Shares in Hong Kong continued to fall on Thursday as dealers worried about the region's economic turmoil and rising interest rates.

Hong Kong stocks extended their losses with the Hang Seng Index dropping below 9,000 for the first time since October.

At one point it was down 5.79% at 8,986. It recovered later to close 3% lower at 9,254.53.

Brokers attributed the fall to overseas selling amid rumours the "peg" linking the Hong Kong dollar to the US dollar would be broken.

Inter-bank rates, at which banks lend to one another, have gone up in the past few months as Hong Kong tries to head off pressure on its currency.

Freefall in Indonesia

While some Asian currencies stabilised slightly, the Indonesian rupiah continued its freefall, hitting a new record low.

For the first time it dropped through the barrier of 10,000 to the dollar.

Correspondents say the financial markets suspect a lack of commitment by the government to economic reforms laid out for Indonesia by the International Monetary Fund (IMF).

President Suharto unveiled a budget on Tuesday which avoided certain demands the IMF is making in exchange for financial aid.

The rupiah has now lost well over half its value in the past month.

American intervention

Some Asian currencies took a breather from recent staggering declines against the dollar, gaining from speculation about possible American intervention for the sliding Japanese yen.

Japan's Vice-Finance Minister Eisuke Sakakibara is in the US for talks on Friday with Federal Reserve Board chairman Alan Greenspan.

After a meeting with US Deputy Treasury Secretary Lawrence Summers, Mr Sakakibara said Japan and America would continue to cooperate "including in foreign exchange markets".

The US dollar edged back up to 132.35 yen from a low of 131.27 earlier on Thursday following Mr Sakakibara's comments, assisted in part by a stronger Nikkei index.

The Nikkei 225 share index gained 1.31% to 15,224.58.

Militant trade unions

Meanwhile militant South Korean trade unions threatened to stage an all-out strike and rejected any compromise which would involve redundancies as a means of escaping the country's economic crisis.

The Korea Confederation of Trade Unions said: "We are ready to stage all-out struggles including general strikes to prevent lay-offs ... and to push for reforms of conglomerates and the punishment of those responsible for the economic debacle."

The KCTU led a crippling strike last year which forced the government to withdraw an unpopular new labour law which would have allowed redundancies.

Flexibility in the labour market and reforms of the country's ailing banking sector were conditions for a $60bn bail-out by the IMF.
 

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