Bullish market sentiment continues despite clashes
JAKARTA (JP): The bullish sentiment in the country's financial markets continued yesterday despite reports of clashes between soldiers and students.
The rupiah strengthened to end the day at 7,750 against the U.S. dollar compared to 8,100 in late trading on Tuesday, while shares prices inched up 1.6 percent.
Analysts said that most investors believed the situation during the second day of the Special Session of the People's Consultative Assembly (MPR) was still better than expected despite reports of clashes between soldiers and antigovernment demonstrators.
Currency dealers said that market participants, who had feared a massive outbreak of violence during the session, had come to realize that the government could maintain security.
"The market finally perceived that the session was not as violent as it was perceived previously," a chief dealer with a local private bank said.
The dealer said that offshore operators, especially from Singapore, sold their dollars for rupiah as they believed the political tension in the country would gradually improve.
"They unloaded their dollars either for profit-taking or for cut-loss reasons," the dealer said.
International Monetary Fund (IMF) director for the Asia Pacific region Hubert Neiss also said on Wednesday that the rupiah should strengthen following the recovery of market confidence in the country's economy.
"We hope confidence will further increase and the rupiah will strengthen. There's no reason why it shouldn't strengthen," he told reporters after meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.
Bank Indonesia Governor Sjahril Sabirin concurred, saying that the recovery of market confidence in the country's economy should provide even more leeway for the rupiah to strengthen against the American dollar.
The assembly's Special Session, which opened on Tuesday and lasts through Friday, is set to pass a new set of electoral laws to pave the way for a general election next year.
Students and opposition leaders have demanded the government cancel the session. They have said the session will only help the ruling Golkar political group and the military maintain the status quo. Other, more moderate, protesters want the assembly to scrap the Armed Forces' dual function and have demanded the government prosecute the former president Soeharto and his cronies.
The analysts said that the rupiah was expected to stay between 7,500 and 8,000 for the rest of the week.
If the Special Session proceeds smoothly and ends with a package of legislation which meets some of the students' and opposition leaders' demands, the political atmosphere will be even more encouraging. "This will certainly further prop up the rupiah," one of the analysts said.
Like the rupiah, share prices in the local market also edged up on Wednesday supported by huge buying programs on second-line stocks following the strengthening of the rupiah in the currency market.
The Jakarta Stock Exchange (JSX) main price index rose 5.70 points to 363.00 on a total turnover of 904.08 million shares changing hands valued at Rp 425.73 billion (US$54.93 million).
Gainers led losers 122 to 23 with 51 stocks unchanged.
Vonny Juwono, an institutional sales broker with Trimegah Securindolestari said: "The assembly's peaceful meeting has prompted investors to buy second-line stocks in the wake of a strong rupiah," she said. (rei/aly)