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1997 will be best remembered as one in which global financial markets were rocked
by tremendous volatility. Two developments shaped the year, the collapse of the currencies
and stocks of the East Asian Tigers economies since July and the wave of selling
which hit the world stockmarkets including a one-day 550-point plunge on Wall Street.
The East Asian economies have for many years been regarded as modern miracles for
economic growth and was the fastest growing region in the world. Since the crisis
hit the region, many fear problems such as soaring inflation and unemployment would
cause global recession.
Currencies and stocks have lost half of their values as the crisis of confidence
continues to hang over the gloomy regional financial markets. Even, Japan, the second
largest economy in the world suffered the collapse of several finance houses, stalling
its already fragile economic recovery.
Currency turmoil, asset price collapse, collapsing investors' confidence, corporate
and financial sector bankrupties, repeated IMF bailout funds for crippled nations,
Korea, Indonesia, and Thailand - all proved to be too costly for many investors.
Malaysia has not been spared. Except for the first quarter of the year where the
key Composite Index hit a high of 1,278.94 on February 26, the year's performance
on the local bourse has been both very painful and disappointing for many.
Blue chips were hard hit losing half of their values while other smaller stocks fared
even worse. The massive sell-down crippled most stock players particularly those
who borrowed to invest. The weak Ringgit did not help. After hitting a 17-month high
of 2.4660 to a US$ dollar on January 13, 1997, the Ringgit has weakened sharply against
most major currencies.
Following is a chronology of events during the year which are worth remembering.
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Table 2. 1997 Summary
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Date
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Events
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January 13
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Ringgit hit a 17-month high of 2.4660 to a dollar. |
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February 26
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The KLCI hit a high of 1,278.94. |
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March 28
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Bank Negara announced curbs on banks' lending to the property sector and share purchases. |
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March 31
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The KLCI dropped 14.5 points - start of market slide. |
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July 22
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Bank Negara announced its foreign exchange reserves fell by 12.5% to 61.90 billion
ringgit after rounds of intervention to defend the Ringgit. |
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August 3
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Bank Negara announces local banks' non-trade related swap transactions in foreign
exchange market is limited to RM$2 million for each foreign customer. |
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August 18
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Rating Agency, Standard and Poorís revised outlook on Malaysia's long-term A-plus
foreign currency and AA-plus local currency ratings to stable from positive |
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August 20
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Malaysia recorded RM1.8 billion surplus in the first quarter 1997 |
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August 21
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Standard & Poor's revised outlook for two Malaysian banks to negative from stable |
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August 27
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Finance Minister Anwar announced the lifting of RM100,000 levy on property purchases
by foreigners with immediate effect |
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August 27
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The KLSE announced trading restrictions on a 100 blue chip stocks and banned short-sellling |
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August 30
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Companies allowed to buy back shares from September 1, 1997 |
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September 04
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Prime Minister Mahathir lifted short-selling on the 100 stocks from September 5 and
indicated mega projects would be deferred due to Ringgit weakness |
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September 25
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Standard and Poor's revised Malaysiaís long-term currency rating outlook to negative
from stable |
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October 17
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Malaysia announced belt-tightening budget for 1998 |
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November 17
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United Engineers (UEM) acquires 32.6% in parent Renong |
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December 01
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Finance Ministers of the ASEAN announced its plan to help each other with funds during
crisis |
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December 05
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Finance Minister Anwar announced further measures to boost confidence in the financial
system |
Source: Normandy Research
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