Demonstrations rock rupiah, stocks again

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)