By Patricia Lui and Candice Zachariahs
Oct. 24 (Bloomberg) -- Asian money-market rates rose as the global credit crisis tipped developing nations including South Korea and Argentina toward recessions and led Standard & Poor's to review cutting Russia's debt ratings.
Hong Kong's three-month interbank lending rate, or Hibor, climbed for the second day, advancing 5 basis points to 3.29 percent. Australian three-month interbank borrowing costs rose 3 basis points to 5.89 percent, the highest since Oct. 15.
Credit markets froze after Lehman Brothers Holdings Inc. collapsed on Sept. 15, prompting governments and central banks worldwide to bail out financial institutions and inject cash into money markets. Banks are reluctant to lend even after funding costs declined the past week as concerns of a global recession undermine economies from Argentina to South Korea and Hungary.
``Markets are concerned over slowing growth in emerging economies, dollar hoarding and dollar shortages,'' said Chatchawan Jumruswittayawong, a foreign-exchange trader at Bank of Ayudhya Pcl in Bangkok.
South Korea's benchmark 91-day certificate of deposit rate rose one basis point to 6.17 percent, the highest since January 2001. Indonesian three-month interbank rates climbed 4 basis points to 12.25 percent, 275 basis points above the central bank's main benchmark. That's the largest premium in three years.
IMF Bail-Out, Recession
Ex-Soviet republic Belarus added to requests from Iceland, Pakistan, Hungary and Ukraine for at least $20 billion of emergency loans from the International Monetary Fund as the financial crisis leaves nations unable to repay their debt. Russia faces possible cuts to its sovereign ratings and Argentina lawmakers are trying to block the president's plans this week to seize the country's pension funds to repay debt.
South Korea's economy grew 0.6 percent last quarter compared with the previous period, the slowest pace in four years, sparking concern the country is headed for its first recession since the 1997-1998 Asian financial crisis.
Hong Kong's Small and Medium Enterprises Mentorship Association urged the government to take more measures to unfreeze credit markets, warning of dire consequences if steps aren't taken to ensure accessible credit for businesses.
Nervous investors dumped stocks this month even as governments and central banks worldwide pledged trillions of dollars in bank aid and unlimited supplies of U.S. currency. Global stock markets have lost $10 trillion and the benchmark MSCI Asia Pacific Index is down 23 percent this month.
Hoarding Cash
South Korea's one-year cross-currency swap rose for the first day in three, as banks raised to 0.53 percent the rate they accept to swap won loans for dollars. The rate, a measure of the availability of dollar funding, averaged 3.08 percent in the first six months of the year.
Singapore's three-month interbank rate for dollar loans was little changed from yesterday, slipping just 0.3 basis points to 3.5220 percent, the smallest decline in nine straight days of falling rates. The government confirmed earlier this month that the island is in a recession.
The London interbank offered rate, or Libor, for three-month dollar loans fell yesterday by the smallest margin in nine days.
``That trend of improvement is there but there have been some renewed worries in the emerging markets,'' said Besa Deda, acting chief economist and strategist at St. George Bank Ltd. in Sydney. ``There are still credit issues in the market, funding is still difficult.''
Banks have been hoarding cash as financial institutions including American International Group Inc. and Fortis Group had to seek government help. Australia & New Zealand Banking Group Ltd., Australia's third-biggest bank, yesterday said it had added A$19.2 billion ($12.9 billion) to its cash holdings this month so it can cover any funding shortfalls.
Financial institutions reduced deposits at Australia's central bank to A$6.15 billion yesterday, down A$51 million from Oct. 22, the Reserve Bank of Australia said today on its Web site. The RBA added A$785 million to money markets today after estimating there would be a A$610 million shortfall.
Funds Freeze Withdrawals
Australian financing costs rose for a third day. The difference between the rate Australian banks charge each other for three-month loans and the overnight indexed swap rate, a measure of funding availability, rose 8 basis points to 80.5 points. The gap, which averaged 44 points in the first six months of 2008, was 75 points a week ago.
Perpetual Ltd. and Axa Asia Pacific Holdings Ltd. yesterday suspended redemptions on A$4.1 billion of income and mortgage funds. MacarthurCook Ltd.'s mortgage fund, which managed A$188 million as of June 30, today said it will halt daily redemptions and only allow withdrawals at the end of each quarter.
Government guarantees on bank deposits are prompting investors to switch cash from such funds into financial institutions covered by the state. The pledge sparked as much as A$20 billion in outflows from mortgage funds, the Australian Financial Review said Oct. 22, citing researcher Morningstar.
Lending Availability
The Libor-OIS spread, a measure of funding availability, was little changed at 255 basis points. It was at 364 basis points on Oct. 10 and 85 basis on Sept. 12, three days before Lehman collapsed.
Libor is set by a panel of banks in a daily survey by the British Bankers' Association at about noon in London. Members provide estimates on how much it would cost to borrow in 10 currencies for terms from one day to a year. About $360 trillion of financial products worldwide, from mortgages to company loans and derivatives, is tied to the Libor.
To contact the reporters on this story: Patricia Lui in Singapore at plui4@bloomberg.netCandice Zachariahs in Sydney at czachariahs2@bloomberg.net.
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