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)