Bullish market sentiment continues despite clashes

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)