Rupiah softens on ample liquidity in market<\/p>\n
JAKARTA (JP): Local share prices gained 2.6 percent yesterday
\nas the rupiah softened on ample liquidity supply in the money
\nmarket, stockbrokers and currency dealers said.<\/p>\n
Brokers said stock prices rose on the lowering of interbank
\nlending rates following an influx of liquidity into the money
\nmarkets from the disbursement of civil servant monthly salaries
\nto banks and the maturing Bank Indonesia Certificates (SBIs).<\/p>\n
The Jakarta Stock Exchange composite index gained 14.163
\npoints to close at 553.646, with turnover totaling 342.3 million
\nshares valued at Rp 493.873 billion (US$163.8 million).<\/p>\n
Vice president of research at Lippo Securities, David P.
\nO'Neil, said that despite regional bearish sentiment, some
\ninvestors started reentering the Jakarta market as they saw
\npositive moves from the government to deal with currency-related
\nproblems.<\/p>\n
"There were some valued foreign fund managers and valued
\ninvestors who made a lot of buying into value-added stocks,"
\nO'Neil said.<\/p>\n
He said companies like Fiskar Agung and Davomas were among the
\nstocks to be chosen because these companies were not highly
\nexposed to foreign exchange loss and generated most of their
\nrevenue in U.S. dollars.<\/p>\n
Currency dealers said the rupiah, apart from tracking the
\nMalaysian ringgit, softened as overnight rates among state banks
\nand large sound banks declined to 15.5\/20 percent from 20\/25
\npercent in the morning.<\/p>\n
"Call money rates grew closer to SBI rates on ample liquidity.
\nBut this dragged down the rupiah against the U.S. dollar in the
\nspot market," one local bank dealer said.<\/p>\n
Spot rupiah closed at 3,012\/3,018 against the greenback,
\ncompared with the day opening of 2,965\/2,970 and Tuesday's close
\nof 2,995\/2,999.<\/p>\n
The dealer said local operators and corporate companies were
\nusing the improved liquidity to buy spot dollars while unloading
\nswaps, reflected by falling rates.<\/p>\n
Overnight swap was at 0.45\/0.60. Tom\/next shed to 0.40\/0.45
\nfrom 0.85\/0.95 points.<\/p>\n
One-week swap edged down to 4.6\/5.5 from 4.8\/5.9, one-month to
\n30\/33 from 30\/34, two to 61\/65 from 66\/71.<\/p>\n
Longer term rates were slightly changed, with three-months at
\n80\/90, six at 188\/193 and one-year at 360\/385 points.<\/p>\n
"The market has anticipated that the central bank will likely
\nlower again short-term SBI rates next week, probably on Monday as
\nthe previous cuts were conducted Monday," the dealer said.<\/p>\n
But he warned that Bank Indonesia would likely tighten again
\nliquidity before cutting SBI rates to stop the rupiah from
\nfurther falls.<\/p>\n
Yesterday's ample liquidity supply and further anticipation of
\nlower interest rates drove short-term swap rates down.<\/p>\n
But lower swap rates, compared to call money rates, had
\ncreated chances for arbitrage.<\/p>\n
"I saw foreign players already starting to again enter
\narbitrage deals to benefit from rate differentials," he said,
\nadding that the equivalent of one-month swap was about 20 percent
\ncompared with a money market rate of 23 percent.<\/p>\n
Aggressive arbitrage deals could tighten the rupiah market
\nagain as the month's end approaches, he said.<\/p>\n
The dealer predicted the central bank would likely also target
\nreducing rate differentials between the swap and money markets to
\ndiscourage arbitrage deals. (aly\/rid)<\/p>",
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