Battered rupiah remains a barrier to stock trading

JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) are expected to further weaken this week due to continued uncertainty over the battered rupiah.

Securities analysts said worries over the private sector's mounting offshore debt, which had caused the rupiah to decline further in the last few weeks, would continue to cast a shadow over stock-trading activities.

"As long as there's no solution to Indonesia's external debt, people will avoid holding rupiah," Laksono Widodo, a senior analyst with ING Barings Securities, said.

"And the more people who refrain from holding the rupiah, the further it will fall," he said.

Indonesia has a total external debt of US$140 billion as of the end of 1997, with the private sector accounting for at least $65 billion.

The government has repeatedly said it will help debt-ridden private companies deal with their overseas creditors but has ruled out any corporate bailout.

The rupiah ended at 13,000/13,500 to the U.S. dollar in Jakarta against an opening of 12,500/12,800 Friday after nose- diving to 15,000 in midday trading. The rupiah crashed to an all- time low of 17,000 Thursday on fears that most Indonesian companies would not be able to pay their foreign debts.

At its current level, the rupiah has lost about 80 percent of its value since early July last year when the rupiah was at 2,450.

Stock analysts said most foreign fund managers would not return to Indonesia in coming months as they feared major corporate bankruptcies would occur in Indonesia.

"With the rupiah's current level at 13,000 to the dollar, there in no single private company which has sufficient cash to survive," an analyst said.

"We're now waiting for the announcement of their collapse in coming months," the analyst, who asked not to be identified, said.

Eddy Widjoyo, an analyst with Mashill Jaya Securities, said the private sector and the government should quickly find a solution to the external debt before proceeding with the implementation of the economic reforms agreed upon with the International Monetary Fund (IMF) last week in exchange for the US$43 billion bailout package for Indonesia.

"The economic reforms announced by the government last week failed to impress financial and stock markets as the rupiah continued to fall against the American dollar and stock prices remained under pressure," he said.

"I think finding a solution to the private sector debt is the important thing now," head of research at a joint-venture securities firm, who asked for anonymity, said.

"There is a lot of uncertainty lingering in Indonesia's economy, in its stock and financial markets and in its political conditions," head of sales at BZW Niaga Securities Adnan Tan said.

Another analyst said the heightened political climate approaching the election in March to elect a new president and vice president would put additional pressure on Indonesia's financial and stock markets.

"But it's a common occurrence in every country. The market has already anticipated that," the analyst said.

Barings' Laksono said the benchmark price index could touch down to 300 points in the near future on renewed political worries in Indonesia's economy.

"I think Indonesia's economy will not recover in the near term but will take at least two or three years," he said.

The JSX composite index rose 8.95 percent last week closing 37.06 points higher to 450.98 points from 413.92 the previous week.

However, average total turnover declined 21 percent to 562.01 million shares last week from 719.73 million shares the previous week.

The average total value also declined 11 percent to Rp 705.03 billion (US$54.23 million) last week from Rp 797.67 billion the previous week.

Stock brokers said the increase in the main price index did not necessarily prove that foreign investors had returned to the local market.

"The rise in the index was caused by massive buying on heavyweight stocks like PT Telkom," a broker said.

"Telkom shares are crucial to determine the direction of the index. We'll just see how Telkom shares perform this week," the broker said.

Most blue-chip stocks were mixed last week with PT Telkom rising Rp 325 to Rp 4,225 Friday while Indosat declined Rp 500 to Rp 16,000, Gudang Garam fell Rp 25 to Rp 10,000 and HM Sampoerna lost Rp 425 to Rp 4,000. (aly)