Hopes dim for stronger rupiah this week: analysts

Hopes dim for stronger rupiah this week: analysts

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 has
operations.

The government plans to sell the company to Mexican-based
cementmaker Cemex SA de CV for about US$520 million.

Irwan said that going ahead with the divestment would
give assuring signals to foreign investors eying other Indonesian
assets.