Rupiah falls again, share prices plunge<\/p>\n
JAKARTA (JP): The Indonesian rupiah plunged again yesterday to
\na new record low against the U.S. dollar and Jakarta share prices
\nfollowed suit, falling by almost 4 percent, analysts said.<\/p>\n
Foreign exchange dealers said spot rupiah stabilized in
\nafternoon trading at 2,900 against the American greenback.<\/p>\n
They said the market lost direction following the floating of
\nthe rupiah Thursday. The trading spread widened from five points
\nbefore the float to 40 points yesterday, exacerbating the fall.<\/p>\n
Spot rupiah slumped to 2,960 in midday trading, from an
\nopening of 2,770\/2,910 and stabilized in afternoon trading to
\nclose at 2,880\/2,910.<\/p>\n
Dealers said nervous local investors joined the dollar-buying
\nfrenzy hedging their position, which contributed to the rupiah's
\nsteep fall.<\/p>\n
\"We all seem to have lost direction and become nervous. I
\ndon't know when this situation will end. But we hope the rupiah
\nwill soon reach its new equilibrium,\" said a local foreign
\nexchange bank dealer.<\/p>\n
He said the market was trading a bit thin because operators
\nwere reluctant to open new positions ahead of the weekend.<\/p>\n
The fall in the rupiah dragged on the Jakarta stock market.
\nShare prices on the Jakarta Stock Exchange, with composite index
\ntumbling by 25.30 points or nearly 4 percent to close at 617.70.<\/p>\n
Total turnover was 386.77 million shares on the regular
\nmarket, worth Rp 537.77 billion (US$ 185.44 million).<\/p>\n
Most stock brokers said yesterday's steep intraday fall was
\ntriggered by panic selling by investors as a result of the rupiah
\nplunge.<\/p>\n
\"I think it's just a blue day for all investors and probably
\nthe blue week of the year due to the fall of the rupiah,\" said an
\nanalyst with a joint venture securities company who declined to
\nbe named.<\/p>\n
Harita Securities' president Christina Lim said most of
\nHarita's clients were advised to sell.<\/p>\n
\"Well, we advise them to stay away from the market until the
\nrupiah stabilizes, except for certain cheap blue chip stocks\" she
\nsaid.<\/p>\n
Adriansyah Chaniago, an analyst from Bahana Securities, said
\ninvestors were confused with the current situation.<\/p>\n
\"Given the current situation, most foreign investors are
\nrunning away from the market,\" he said.<\/p>\n
\"As long as the rupiah is still under attack, the stock market
\nwill not recover,\" he added.<\/p>\n
State Minister of National Development Planning Ginandjar
\nKartasasmita assured the market yesterday that Indonesia's
\neconomy could withstand the float of the rupiah.<\/p>\n
\"We just follow market economic principles. And our economy is
\nstrong enough to face that (the floating of the rupiah),\"
\nGinandjar told journalists at the Presidential Palace.<\/p>\n
He said Indonesia's economic fundamentals were strong and
\nforeign exchange reserves were sufficient to finance more than
\nfive months of imports. The country also had monetary tools at
\nits disposal such as the open market operation, he said.<\/p>\n
The minister reiterated that the decision to float the
\ncurrency would not harm economic growth and the inflation rate
\ntarget.<\/p>\n
The government's move to float the rupiah was welcomed by the
\nInternational Monetary Fund who praised Bank Indonesia, the
\ncentral bank, for its action.<\/p>\n
The fund said the move would allow the country's economy to
\ncontinue its recent impressive performance.<\/p>\n
Reuters reported that emerging market economists in London and
\nNew York were unanimous that Bank Indonesia had made the right
\ndecision in ending its system of managing the exchange rate via
\nan intervention band in the face of speculative attacks.<\/p>\n
U.S. investors and analysts generally agreed the Indonesian
\ncentral bank acted wisely in floating the currency.<\/p>\n
But Deutsche Bank Group's chief economist Norbert Walter said
\nhere yesterday the float would not solve any problem and
\nsuggested the government work on long-term solutions to
\nstrengthen the economy.<\/p>\n
\"Floating doesn't solve anything. It will only increase the
\ncost of production and in the end it will go back to being
\nuncompetitive with higher inflation,\" Walter said.<\/p>\n
He suggested the government strengthen the financial sector,
\nadjust the microeconomy using better fiscal policies and labor
\nmarket and pursue less government intervention. (das\/aly\/rid)<\/p>",
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