Hopes dim for stronger rupiah this week: Analyst
Berni K. Moestafa, The Jakarta Post, Jakarta
The rupiah is set for another week of dull trading, in the absence of any signs from home or abroad likely to alleviate market concerns over prolonged anti-U.S. rallies and the country's fragile economy in the midst of a global downturn, analysts said.
Currency analyst Farial Anwar said the market saw more reason for the rupiah's continued weakness than for a recovery.
"So far nothing has improved; the economy, security remain as they were before," Farial told The Jakarta Post over the weekend.
He said Indonesia had yet to come up with a plan to cope with the economic gloom that hit the world in the wake of last month's terrorist attacks on the United States.
The attacks pushed the world to the brink of recession, forcing emerging markets like Indonesia off foreign investors' radar screens.
"The market is waiting for signals from the government that they are actually going to do something about this situation," Farial said.
Continued rallies protesting the U.S. military attacks against alleged terrorists in Afghanistan have also put at risk relations with international lenders.
This development weighed on market sentiment, Farial said.
He said the Asia Pacific Economic Cooperation (APEC) summit in Shanghai should be an opportunity to clarify Indonesia's position with foreign leaders.
That should help subdue the anti U.S. protests here, while ensuring donor countries remained committed to Indonesia, he said.
Posing another obstacle to the rupiah's recovery was the growing demand for the U.S. dollar, he added.
Farial said dollar supply was depleting fast, as importers piled up inventories in anticipation of a surge in consumer demand ahead of the year-end festive season.
This would strike the rupiah at a time when the currency market was devoid of foreign investors' dollars.
He said Bank Indonesia would likely remain the only dollar seller in the market.
At its current levels, however, the rupiah could find solace from players seeking to take profit on the dollar, he said.
The rupiah fell back to 10,000 territory and closed last Friday trading at 10,085 compared to 9,965 a week earlier.
Farial predicted the rupiah would linger this week at around 10,000 to 10,200.
In the stock market, analyst Irwan Junus of Indosuez W.I. Carr Securities warned the absence of positive news could cap the index's upward trend.
Defying the downturn among its regional peers, the Jakarta Stock Exchange Composite Index edged up higher in last week's trading to end at 387.85 points, against 378.79 a week before.
But Irwan said that securities firms enticing stock trading and not bargain hunting investors had pushed the index up.
"Many investors have switched from stocks to investing in fixed income," he explained.
For this week, he said, the market would watch with interest the government's plan to divest state owned cement firm PT Semen Gresik amid protests from regions where the company operates two units.
The government plans to sell the company to Mexican based cement maker Cemex SA de CV for about US$520 million.
Irwan said that going ahead with the divestment would give assuring signals to foreign investors eyeing other Indonesian assets.