Demonstrations rock rupiah, stocks again
JAKARTA (JP): The country's financial market remained under severe pressure on Thursday due to escalating student demonstrations in the capital.
Currency dealers said the rupiah ended the day at 11,200 against the U.S. dollar, down from 11,025 in late trading on Wednesday.
Despite a plunge in share prices, the rupiah managed to stabilize at the 11,000 level in the last two days, benefiting from rumors that the government would impose a Malaysian-style capital control.
"Speculation that the government will impose a capital control system prevented the rupiah from falling against the dollar," a dealer with a private bank said.
Dealers attributed the rupiah's weak stance, despite daily persistent dollar selling by several state banks, to fears of political and social instability at home following growing student rallies in the capital and several major cities.
News reports said that over 1,000 university students of Trisakti University and Tarumanegara University in West Jakarta marched down a busy street on Thursday in protest against the government for failing to bring down prices. Separately, a group of 100 students and prodemocracy activists staged a protest near the House of Representatives to protest a government-sponsored bill that restricts public demonstrations.
The dealers said that fear of unrest dominated the market sentiment.
"I think the rupiah fell largely due to the student demonstrations," another dealer said, pointing out that the rupiah may trade for between 11,000 and 11,500 ahead of the weekend.
Like the rupiah, stock prices on the Jakarta Stock Exchange (JSX) also followed suit, with the main price index falling 1.87 percent or 5.45 points to 285.47 with 165.58 million shares worth Rp 183.78 billion (about US$16.42 million) changing hands.
Losers led gainers 61 to 25, with 81 shares ending unchanged.
Stock brokers said lingering fears that the government would introduce a Malaysian-style capital control plus renewed political instability at home had resulted in heavy selling pressure on the market.
"Today's student demonstrations further worsened the market sentiment," Antonio Yongnata, head of institutional sales of Mashill Jaya Securities, said.
Vickers Ballas Tamara's head of research, Noraya Soewarno, agreed, saying most foreign investors made cut-loss sales to prevent bigger losses.
"Foreign investors are discarding their stocks, even those of relatively healthy companies," she said, referring to state telecommunications firm PT Telkom, Indosat and mining firm PT Tambang Timah.
Stock analysts also said that selling pressure on the local market was caused by uncertainties over the future ownership of some listed companies as their owners may have been involved in huge financial fiascoes.
"The bleak prospects of Indonesian companies forced foreign investors to continue massive sell-offs," Mashill's Antonio said. (aly)