By Keith B. Richburg
Washington Post Foreign Service
Saturday, December 13, 1997; Page A01

HONG KONG, Dec. 12—In Indonesia, the battered rupiah plunged today to record depths, undermined by rumors that President Suharto's health is failing. In Thailand, the baht fell to an all-time low, even as politicians moved to resolve the fate of dozens of ailing finance companies. And in Hong Kong, at least one investment company began laying off staff as the local dollar came under renewed threat.

Today was the bleak end to a grim week for Southeast Asia's hard-hit financial markets, as the effects of South Korea's economic downturn reverberated throughout a region still staggering from its own financial free fall. What began as a spectacle of The Incredible Shrinking Economies might this week be summed up as a game called "Dialing for Dollars."

What's most worrying to many regional financial analysts and economists is that bailout packages from the International Monetary Fund have failed to stem the downward slide. Instead of shoring up confidence, the loans -- coupled with their tough prescriptions for reform -- have exposed some underlying problems in the economies of the hardest hit countries, including a massive foreign debt burden that has sparked a regional scramble for dollars.

The IMF intervention "doesn't seem to be enough," said Lim Say Boon, director of Crosby Corporate Advisory in Singapore. "You've got an extreme of pessimism now. It's a herd mentality gone completely out of control."

Economists see much of the region's problems as reverberation from the worsening crisis in South Korea. Overseas investors have largely soured on East Asia, little new investment is coming in, and foreign companies with dollar debt are unloading their own currencies cheaply in search of greenbacks.

"There's been a mugging in your neighborhood, and now good, decent, right-minded folks don't want to walk into your neighborhood," Lim said, describing the pessimism of overseas investors. "And those of us in the neighborhood want to get some foreign currency, but we can't. Unless you break this loop, there's a real danger that nice little neighborhoods will become impoverished little ghettos."

Other analysts agreed that a frantic search for dollars by debt-laden local businesses -- not the work of nefarious foreign speculators -- is driving down regional currencies. "There's a continued panic for dollars," said Bruce Gale, regional manager of Political and Economic Risk Consultancy.

A manager of a local investment fund in Hong Kong agreed that the new problem is a severe shortage of hard currency. "All of these countries have huge offshore debt and absolutely no way to repay it," he said, "so they keep selling currency and buying dollars. It's like one of those tortures in Hades -- it just never stops."

In Bangkok, for example, analysts said Thailand faces an end-of-year credit crunch that usually translates into higher interest rates. Many short-term loans are due for rollover at the close of the calendar year. But this time, the traditional year-end squeeze comes amid news that South Korea's troubles may be worse than suspected, even as the new Thai government moved toward closing 56 of 58 suspended banks and finance firms.

The Thai baht fell today to 45.5 to the dollar and has lost more than 40 percent of its value since the financial crisis began in July. Stocks ended the week at a nine-year low. The week's devastation prompted Prime Minister Chuan Leekpai to tell reporters, "What happened to the baht now was not caused much by local factors, but by regional problems. We have no room left for mistakes."

The governor of Thailand's central bank, Chaiyawat Wibulswasdi, said the government will intervene to prevent drastic daily swings in the currency's exchange rate and is waiting for a $3.3 billion installment on the $17.2 billion IMF loan agreed to in August.

In Indonesia, the rupiah fell to a low of 4,950 to the dollar, and stocks plunged again, partly on rumors -- swiftly denied in Jakarta -- that Suharto is seriously ill.

The rumors began swirling after the president canceled plans to attend a recent Islamic leaders' conference in Tehran and his doctors advised him to take a 10-day rest.

Few regional currencies have been spared. In the Philippines, which was considered to have best weathered the regional crisis, the peso today dropped to a record low of 37.36 to the dollar, the total loss allowed before trading was suspended. The peso's plunge came a day after the central bank governor boasted that the Philippines has the region's strongest currency.

The Taiwan dollar ended the day at 32.48 to the dollar, sharply below its Thursday close, and the Singapore dollar, also considered relatively safe, dropped to 1.645, amid predictions that it could soon reach 1.7 to the dollar. The Hong Kong dollar, which is pegged to the U.S. dollar with very limited fluctuation, was at 7.75, the rate that is believed to trigger intervention by the local monetary authority.

Since the beginning of the year, the Thai baht has lost 65 percent of its value, the Philippine peso has lost 30 percent, the Malaysian ringgit has lost 44 percent and the Indonesia rupiah has lost 92 percent, according to assessments by Philippine government officials.

The regional financial crisis once again this week focused attention on the Hong Kong dollar, which is the last regional currency with what amounts to a fixed exchange rate. Over the summer, the government here beat back speculative attacks on the local currency by raising overnight interest rates to loan-shark levels. But the effect was devastating for some local companies, particularly property firms, that have taken a beating on the stock market.

Stories circulated today around Exchange Square, Hong Kong's equivalent to Wall Street, that financial companies were sending pink slips to employees as they begin downsizing for leaner times. Indosuez W.I. Carr Securities was said to be laying off about 72 staff members, an industry source said. The company declined to comment, saying it will issue a statement later.