Asian Currencies: Won, Taiwan Dollar Fall as Stocks Tumble

By Lilian Karunungan and Kim Kyoungwha

Sept. 16 (Bloomberg) -- South Korea's won fell by the most since at least August 1998 after Lehman Brothers Holdings Inc. filed the biggest bankruptcy in history, fueling speculation global investors will step up sales of local shares and repatriate funds. Taiwan's dollar weakened.

The currency, the biggest loser among 26 emerging-market currencies tracked by Bloomberg, approached a four-year low and the nation's Kospi stock index tumbled as much as 6.5 percent. Vice Finance Minister Kim Dong Soo said the government may provide funds to help stabilize financial markets.

``There's panic selling for the won as investors' sentiment is badly bruised by Lehman's bankruptcy,'' said Lee Myung Hoon, a currency dealer with Industrial Bank of Korea in Seoul. ``A global share tumble is taking a toll on the local equity market. We are not sure how far the won will drop.''

The won fell 3.8 percent to 1,152.55 against the dollar as of 12:20 p.m. in Seoul, according to Seoul Money Brokerage Services Ltd. It reached 1,159 on Sept. 3, the weakest since August 2004. Taiwan's currency fell as much as 0.5 percent to NT$32.216, the weakest since Feb. 1, according to Taipei Forex Inc.

``There's a concern in the short term that global stocks, bonds and currency markets will be more volatile,'' South Korea's Kim said before an emergency meeting today with counterparts from the central bank and the financial regulator in Seoul. ``We will try to manage liquidity in a stable manner through measures such as open market operations.''

Global investors sold more Korean shares than they bought every day except six since Aug. 1, according to Korea Exchange data.

Risk Aversion

Taiwan's dollar slumped as the Taiex index plunged 4.4 percent, bringing this month's slide to 18 percent, and the government instructed its four major funds and state-owned banks to buy shares to help arrest the losses. Lehman's bankruptcy left the island's companies with NT$80 billion ($2.5 billion) at risk, the financial regulator said in a statement last night.

``Financial markets are still trying to digest the events that happened over the weekend,'' said Christy Tan, a currency strategist at Bank of America in Singapore. ``We're still seeing risk aversion, and financial shares are the brunt of the sell- off. I think it'll lead to a higher U.S. dollar against Taiwan's currency in the near term.''

The Taiwan dollar was little changed yesterday after the central bank sold more than $500 million in the currency market, the Commercial Times reported today, citing traders it didn't identify.

AIG Rescue

The Philippine peso declined for a second day as the MSCI Asia-Pacific Index of stocks slumped the most in eight months. The index headed for its lowest since August 2006 after American International Group Inc. sought capital to prevent a collapse. Foreign investors sold $605 million more Philippine stocks than they bought this year, according to stock exchange data.

``People are waiting for further news from AIG,'' said Catherine Tan, head of foreign exchange at Thomson Financial Asia in Singapore. ``If the rescue falls through, there will be much more blood on the street and there will be more selling of currencies. When you have risk aversion, the peso is one of the currencies being hit in Asia.''

The local currency dropped 0.4 percent to 47.265 per dollar in Manila, according to Tullett Prebon Plc. The peso has fallen 12 percent in the past six months.

AIG, which had its credit ratings cut by Standard & Poor's and Moody's Investors Service, is seeking as much as $75 billion in loans to boost capital, according to people familiar with the situation.

Elsewhere, the Singapore dollar rose 0.1 percent to S$1.4326 against the U.S. currency. The Thai baht gained 0.6 percent to 34.38. The Malaysian ringgit and Indonesia's rupiah were little changed versus the dollar at 3.4525 and 9,465, respectively. Vietnam's dong traded at 16,585 versus 16,590 yesterday.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Kim Kyoungwha in Beijing at kkim19@bloomberg.net