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)