Analysts forecast gloomy week for markets
Berni K. Mustafa, The Jakarta Post, Jakarta
Clouds looming over the global economy, capital outflow and security concerns here could see further lows experienced by the rupiah and the stock index this week, analysts said over the weekend.
Head of fixed income research at PT Danareksa Sekuritas, Khalil Rowter, said a reprieve for the rupiah was unlikely in the short term.
"The market is running short of dollars, while regular dollar buyers like PLN and Pertamina continue to soak up supplies," Khalil said, referring to the country's two state energy companies.
He said the recent terrorist attacks against the U.S. had dealt another blow to an already slowing U.S. economy, pushing the rest of the world to the brink of recession.
This condition has made banks around the world hold back on investment to secure short-term liquidity.
"Foreign banks pile up their dollar reserves to anticipate settlements from their counterparts, mainly in the U.S," he explained.
Japanese firms have also repatriated their dollars from around the world as October is the middle of Japan's fiscal year, he added.
Khalil said the rupiah's decline was compounded by developments at home, where rising anti-foreign sentiment has pressured capital outflow.
Anti-U.S. protests have unsettled Jakarta and other cities, as the United States gears up for war against the Taliban regime in Afghanistan.
Various local radical groups have threatened to expel U.S. citizens, unsettling foreign investors around the country.
"When people leave the country, they take with them their dollar accounts here, and so do foreign companies," he said.
He said the market also expected no fresh dollar inflows given the government's indecisiveness over its privatization plans.
Khalil was referring to the stalled sale of PT Semen Gresik and PT Bank Central Asia (BCA), which could have stimulated the market.
He said the rupiah could easily test the 9,800 level or above in the absence of fresh leads to uplift the local unit.
In this week's trading, the rupiah dropped to 9,710 against the U.S. dollar from around 9,410 a week before.
"What has been keeping the rupiah from falling back to the 10,000 level is dollar-selling by Bank Indonesia and IBRA (the Indonesian Bank Restructuring Agency)," he said.
He said the rupiah's direction depended on how much Bank Indonesia was willing to spend on intervention and whether IBRA could push ahead with its asset sales.
In the stock market, the index breached the 400 level to close the week at 392.47, as against 414.43 a week earlier.
Stock analyst Ahmad Subagja at PT Niaga Securities said a drop in the shares of market heavyweight PT Telkom Indonesia had led to the index's dip into 300 territory.
He said investors disposed Telkom shares on news of the company's plan to undertake a right issue.
For this week, Ahmad predicted that the market would remain bearish with investors keeping a close eye on the anti-U.S. protests here.
He said the stock market would find its support level at around 375, with resistance at 400.