Bullish stock market to help drive rupiah up
Bullish stock market to help drive rupiah up
Dadan Wijaksana, The Jakarta Post, Jakarta
An absence of fresh news is expected to limit the movement of
the rupiah this week, although bullish sentiment in the stock
market will provide more leeway to the local currency to slightly
strengthen against the dollar, an analyst has said.
The rupiah closed higher last week at Rp 8,740 against the
U.S. dollar, compared to the previous week's closing of Rp 8,870.
For this week, a currency analyst with an international bank
predicted the rupiah would test the Rp 8,700 level on continued
healthy sentiment in the stock market, the composite index of
which experienced a 6 percent increase last week.
"In line with the movement in the stock market, the rupiah
will be stable with a strong upward tendency this week," he told
The Jakarta Post over the weekend.
Relatively stable macroeconomics indicators will also spur
positive sentiment in the market, but dollar demands from
corporations will likely offset the rupiah's movement, he added.
Many of the country's debt-ridden companies, which are saddled
with foreign debts totaling US$60 billion, will need dollars to
repay their maturing debts as well as finance imports, which will
eventually cast a shadow on the rupiah's performance.
The companies borrowed the money before the 1997-1998 Asian
financial crisis, which crippled the country's economic
activities, in turn prompting the companies to seek debt
rescheduling.
However, as most of the companies only managed to secure a
three-year rollover, they had to start making payments for
maturing debts last year.
Nevertheless, that will only slightly impede the upward trend
of the rupiah as the market is focusing on progress in bank
divestment programs and privatization.
"If there is progress, it would be good for the rupiah," the
analyst said.
The government is currently preparing to relaunch the canceled
sale of a 71 percent stake in Bank Niaga, with 20 percent first
being sold directly on the stock market, followed by the
remaining 51 percent stake being offered to strategic investors.
The government also plans to sell a majority stake in Bank
Danamon next month and in Bank Lippo by the end of the year
together with the sale of a 30 percent stake in Bank Mandiri.
In the stock market, positive sentiment will keep the market
players active, following the 6 percent jump in the composite
index last week, according to a dealer with a local brokerage.
He was quick to add, however, that profit-taking would start
to set in, impeding the index's further movement.
"I think the market will remain active this week, with players
turning to second-liners. However, profit-taking should dominate
trading in the first days of trading," he told the Post.
The Jakarta Stock Exchange composite index rose 30.976 points
over the week to 545, from 514.02 points, mostly triggered by
expectation of the upgrading of the country's sovereign rating
following an agreement to reschedule some $1.3 billion in debts
to private creditors grouped under the London Club.
Daily volume last week averaged 987 billion shares valued at
Rp 703 billion ($80.6 million) compared to the previous week's
481.34 million shares valued at Rp 386.44 billion rupiah.
State telecommunications firm PT Telkom rose Rp 325 over the
week to Rp 4,275 and Indosat closed Rp 100 higher over the week
at Rp 11,450.
Cigarette producer Sampoerna gained Rp 125 over the week to Rp
4,475 while rival Gudang Garam surged Rp 850 over the week to
close at Rp 11,550.