New LoI not expected to boost rupiah<\/p>\n
JAKARTA (JP): Emerging from the positive sentiment over the
\nnew government and its good start with the International Monetary
\nFund (IMF), the rupiah's waning strength would unlikely find
\nreprieve in Monday's expected completion of a new Letter of
\nIntent (LoI) with the Fund, analysts said.<\/p>\n
Economist Dradjad H. Wibowo of the Institute for Development
\nof Economics and Finance (Indef) said the market had largely
\nfactored in the completion of the IMF's LoI.<\/p>\n
\"Don't expect the rupiah to appreciate much from the new LoI,\"
\nhe told The Jakarta Post over the weekend.<\/p>\n
He said the rupiah's surge upon the completion of a new LoI,
\nwould largely be driven by short term expectation.<\/p>\n
A visiting IMF team arrived in Jakarta last Sunday to draw up
\na lending agreement with the government, better known as the LoI.<\/p>\n
Should the IMF agree to the new LoI, it would unlock its
\nlong withheld US$400 million loan tranche for Indonesia.<\/p>\n
Led by the Fund's Asia Pacific Deputy Director Anoop Singh,
\nthe team is slated to leave Jakarta today.<\/p>\n
Though it refrained from stating Monday as a target, the
\nteam's constant remarks that talks were \"on track\", signaled the
\nIMF was ready to resume its lending program for Indonesia.<\/p>\n
On Friday, the Fund met with local representatives of donor
\ncountries under the Consultative Group on Indonesia (CGI),
\nassuring them the country had made good headway with its reforms.<\/p>\n
State Minister for National Development Planning, Kwik Kian
\nGie said the IMF's comments helped bolster donor countries'
\nconfidence in Indonesia's economy.<\/p>\n
That in turn would enable the government to gain support from
\nCGI to help cover the 2002 state budget deficit. The CGI will
\nconvene in November for future loan discussion.<\/p>\n
Despite the inflow of positive remarks from the IMF, the
\nrupiah has been trading flat.<\/p>\n
Last Monday, the local unit started off high over news of the
\nIMF's arrival, and the upbeat mood on the government.<\/p>\n
Later in the week, investors shrugged off positive news from
\ntalks with the IMF, allowing corporate dollar demand to offset
\nthe rupiah's earlier gains.<\/p>\n
On Friday, the local unit closed at 8,730 against the
\ngreenback down from 8,550 on Monday, or flat from last Friday's
\nclosing at 8,740.<\/p>\n
Dradjad said the rupiah had yet to trade more on fundamental
\nsentiments, shifting from the current speculative mood in the
\nmarket.<\/p>\n
\"I see the rupiah already entering its fundamental zone,\" he
\nsaid.<\/p>\n
There, he said, the rupiah was exposed to corporate dollar
\nhunters in need to repay foreign debts.<\/p>\n
\"Private foreign debts (maturing) in the second half of this
\nyear could reach as high as $19 billion,\" he warned.<\/p>\n
According to him, companies had rolled over some 30 percent of
\nthe $10.9 billion in debts due to mature in the first half, to
\neither the second half or next year.<\/p>\n
As for government foreign debts, he went on, the amount could
\nhit $6 billion, if it fails to activate a void Paris Club II debt
\nrescheduling deal.<\/p>\n
The Paris Club creditor nations agreed to reschedule payment
\nof debts worth $2.8 billion, on the condition Indonesia secures
\nthe IMF's LoI.<\/p>\n
With the club to meet in September, both the IMF and Indonesia
\nexpect to have a new LoI signed early that month at the latest.<\/p>\n
Dradjad said for this week, the rupiah was likely to remain in
\nits fundamental zone, that would peg the unit at between 8,300 to
\n8,900 to the dollar.<\/p>\n
On the stock market, positive news from the IMF did little to
\nuplift the market's weak buying sentiment. Trading for the week
\nwas stuck at between 435 to 441.<\/p>\n
Trading value ranged at around Rp 400 billion, but sagged to
\nRp 267 billion on Friday's trading.<\/p>\n
The Jakarta Stock Exchange (JSX) Composite Index closed
\nFriday trading at 441.22 from 435.32 a week earlier.<\/p>\n
Stock analyst Adrian Rusmana of PT BNI Securities said Bank
\nIndonesia's decision to hike its interest rates could discourage
\ninvestors from entering the stock market.<\/p>\n
In last week's auction, Bank Indonesia three-month promissory
\nnotes (SBI) climbed to 17.61 percent from 17.30 percent a week
\nbefore.<\/p>\n
Consequently, banks would raise their deposit interest rates
\naccordingly, or to around 17 percent, Adrian explained.<\/p>\n
\"Why would I want to enter the capital market, if I can make
\nsome 17 percent on the money market,\" he said.<\/p>\n
Bank Indonesia executive said interest rates would remain
\ntight, due to continued inflationary pressure.<\/p>\n
Adrian said investors further anticipate SBI rates to flirt
\nwith the 18 percent mark in this week's auction.<\/p>\n
The central bank gave no clear signals on when it would ease
\nits money policy, citing only it awaited concrete improvement in
\nthe economy.<\/p>\n
Adrian also warned of market intervention in the coming days,
\nif the market remains thin and the index weak.<\/p>\n
\"I saw the usual intervention scheme on Friday's trading,
\nwhich appears to have propped the index up shortly before the
\nmarket closed,\" he explained.<\/p>\n
Foreign investors with two-month old positions would likely
\ncontinue to unload local shares, he said.<\/p>\n
Back then growing optimism of Megawati Soekarnoputri becoming
\nthe country's fifth president, enticed foreign investors to join
\nthe buying spree of local shares.<\/p>\n
\"Although shares have fallen drastically since the new
\ngovernment took over, the rupiah's past gains partly made up for
\nthe loss in the share value,\" he explained.<\/p>\n
Given the bleak outlook, Adrian expected the index to trade at
\nbetween 442 to 430 for this week.(bkm)<\/p>",
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