Debt agreement fails to lift ailing rupiah

Debt agreement fails to lift ailing rupiah

JAKARTA (JP): A debt accord between Indonesian debtors and
their foreign creditors failed to lift the ailing rupiah,
currency traders said yesterday.

The rupiah closed unchanged at 11,550 against the U.S. dollar
in thin trade, dealers said.

In contrast to the rupiah, prices on the Jakarta Stock
Exchange (JSX) rose slightly as investors responded positively to
the debt deal, stockbrokers said.

Currency dealers said the debt agreement, which should have
improved market sentiment, failed to entice offshore funds back
into the currency market because of lingering political
uncertainties.

"The debt accord in itself is positive but political
uncertainties overshadow it," a senior dealer with a local
private bank said.

The Indonesian debt negotiation team and creditor banks
reached an accord on Thursday which included a comprehensive
program to restructure the private sector's US$80 billion
external debt over a period of eight years. A three year period
of grace during which no principal need be repaid was also
granted.

However, the dealer said that persistent political and social
uncertainty prevented offshore funds from off-loading dollar
holdings for rupiah.

The rupiah closed at Rp 11,550 against the American dollar
yesterday, almost unchanged from where it finished trading on
Thursday.

Hundreds of protesters rallied outside the U.S. Embassy in
Jakarta yesterday calling on the Washington not to interfere the
country's domestic affairs.

Other anti-American demonstrations have taken place here in
recent days as Indonesia begins painstaking efforts to address
the economic and political crises.

However, currency dealers said that an expected resumption of
aid payments from the International Monetary Fund (IMF) in the
weeks ahead should help to bring the rupiah back toward Rp 8,000
to the dollar.

"The debt accord and the release of the IMF loan are two
positive pieces of news which should help to improve sentiment in
market," the dealer said.

The Jakarta Stock Exchange (JSX) benchmark price index closed
3.18 points up on 409.52 yesterday, with 490.13 million shares
worth Rp 561.27 billion (US$51.09 million) changing hands.

A broker with Credit Lyonnais Capital Indonesia said trading
activities were buoyant in the morning in response to the debt
deal but the encouraging signs faded away in the afternoon after
most local investors took profits on the gains made in the
morning.

"The slight increase was just market euphoria," the broker
said.

A broker with Mashill Jaya Securities said that several big
foreign brokerage firms, including Jardine Fleming, Vickers
Ballas Tamara, SBC Warburg and ING Barings had placed more
selling orders than buying ones.

"It shows that foreign fund managers are continuing to avoid
the local market,' the broker said.

He added that food maker PT Indofood Sukses Makmur shares fell
Rp 75 to Rp 1,500. The day's high was Rp 1,925 and 116.16 million
shares changed hands. Automotive manufacturer PT Astra
International shares fell Rp 150 to Rp 1,050 on 50.24 million
shares changing hands.

Karman Pramurahardjo of Harita Securities said the country's
persistently gloomy economic outlook, spiraling inflation and
political uncertainty posed major problems for foreign investors.

"There are no foreign investors who are willing to put funds
in our dire market," he said. (aly)