Capital control issues boost rupiah, hit stocks
Capital control issues boost rupiah, hit stocks
JAKARTA (JP): The rupiah rallied on Monday to close at 10,575
against the U.S. dollar on news that the government was
considering tightening the monitoring of capital flows into and
out of the country, currency dealers said.
The news also sent ripples through the local stock market,
contributing to a 0.7 percent drop in share prices, stockbrokers
said.
Currency dealers said that news regarding the possibility of
increased monitoring of foreign exchange flows had encouraged
some offshore players, especially those with short rupiah
positions, to unload their dollar holdings to cover their future
rupiah obligations.
"Although the government has repeatedly stated that it will
never adopt capital controls like in Malaysia, offshore players
have not yet ruled out the possibility and are scrambling for
rupiah," a dealer with a local private bank said.
Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita told Bisnis Indonesia on Monday that the
government was studying various ways to monitor foreign exchange
flows, including obliging firms to deposit export earnings in
local banks.
However, Ginandjar made clear that any system would not
include capital controls like those recently introduced by
Malaysia.
Currency dealers said the rupiah was also boosted by continued
dollar selling on the part of state banks. Moderate dollar
selling by state banks practically held the rupiah-dollar rate at
the 10,575 level all day.
"The rupiah never fell back to over 10,600 against the dollar
today because state banks continued to sell dollars for 10,600 or
less," a dealer with another local private bank said.
He also said that the rupiah was boosted by improved sentiment
across the region.
With such positive sentiment on the rupiah, currency traders
are practically ignoring the gloomy picture of the Indonesian
economy, with gross domestic product contracting by 13.59 percent
(in the first nine months of this year) and the inflation rate
rising a further 3.75 percent in September.
Stockbrokers and analysts said that news of capital controls
and worsening economic indicators had left bleak sentiment on the
bruised local market.
Bahana Securities associate director and head of equity sales
Andre Cita said that the capital control issue would linger on
until the government, with the consent of the International
Monetary Fund (IMF), made whatever move it intends to take with
regards to monitoring capital flows into and out of the country.
Cita said he believed that whatever measures the government
did eventually take, they would not include the type of controls
recently introduced by Malaysia.
Cita said that it was the fiasco surrounding emerging markets
and not domestic issues which had driven the market down on
Monday.
"The main issue here is not domestic factors, but global
factors. Fund managers are shunning emerging markets now. They
are selling whatever stocks they hold in emerging markets without
considering their value," he said.
The Jakarta Stock Exchange (JSX) Composite Index closed down
1.915 points at 261.314, with a trading turnover of 108.1 million
shares valued at Rp 110.53 billion.
State-owned telephone monopoly PT Telkom, which accounts for
17 percent of market capitalization in the JSX, failed to drive
up the index, despite recording a rise in value. Shares in Telkom
rose Rp 75 to close at Rp 1,400 on 14.7 million shares traded.
Shares in state-owned satellite operator PT Indosat dropped Rp
425 to Rp 5,125 on 449,000 shares. The state-run general mining
firm PT Aneka Tambang also fell Rp 75 to Rp 1,125 on 3.3 million
shares, state-owned tin miner PT Tambang Timah lost Rp 150 to Rp
3,900 on 730,000 shares, while shares in state-owned cement
manufacturing firm PT Semen Gresik rose Rp 400 to Rp 6,000 on 1.8
million shares.
Cigarette manufacturer PT HM Sampoerna's shares slid Rp 75 to
Rp 2,300 on 2.58 million shares traded, while shares in the rival
PT Gudang Garam fell Rp 225 to Rp 5,100 on 3.1 million shares.
(rid)