IBRA sales predicted to lift rupiah
The Jakarta Post, Jakarta
After strengthening slightly last week, the rupiah still has a good chance of riding the positive momentum this week, as the supply for dollars in the market is likely to remain strong, overweighing its demand, analysts said.
"The rupiah will continue to strengthen this week, as the dollar supply will come from winning bidders in the Indonesian Bank Restructuring Agency's (IBRA) asset sale program making their payments. Although the increase will not be drastic," Pardi Kendy told The Jakarta Post over the weekend.
Late last month, IBRA sold Rp 145 trillion worth of non- performing bank loans for around Rp 17.7 trillion. The loans were taken over from ailing banks in the late 1990s.
Almost half the winning bidders are foreign and they are expected to bring in U.S. dollars and covert them into the local unit to make their payments, which will provide some support for the rupiah.
It was the same kind of capital inflows that strengthened the local currency last week against the U.S. currency.
The rupiah closed last week at Rp 8,960 per dollar, slightly higher than Rp 9,085 the week before.
Pardi added that the dollar demand from indebted companies would be relatively low and would not pose a significant threat to the rupiah.
"Corporations usually start collecting dollars by the end of the month. So, my guess is demand (for dollars) will be low this week," he said.
A dealer at a foreign bank agreed, saying the demand for dollars this week would only come from corporations to finance imports, not for the payment of overseas debts.
"This should be OK for the rupiah, as (dollar) demands for imports are likely to remain low," he added.
Both Pardi and the foreign dealer pointed at another potential positive factor for the rupiah: A positive review by the International Monetary Fund on the country's economic reform program.
An IMF team has just completed a week-long visit to review the country's progress in implementing key macroeconomic reform programs. Compliance would pave the way for the disbursement of the next IMF loan tranche.
The IMF has been providing a $5 billion bailout loan for Indonesia, in return for the implementation of certain economic reform measures and the meeting of economic targets. So far, the country has received $2.6 billion.
Continuing support from the IMF would give the rupiah a much- needed boost, said Pardi, who's also the director of Bank Buana.
Meanwhile, the stock market is expected to move sideways with players applying a wait-and-see stance on continued concerns over the movement of shares on Wall Street, an analyst said.
Positive news is also expected from the upcoming U.S. Federal Reserves meeting, according to stock analyst Erwinda Anggraini.
"The meeting is likely to result in the cutting of the (Fed) interest rates," Erwinda told the Post.
The Jakarta Stock Exchange Composite index ended last week at 450.236, down 6.079 points or 1.3 percent from the previous week.
Last week's daily volume averaged 672.64 million shares valued at Rp 375.26 billion, compared to the previous week's 593.96 million shares valued at Rp 429.98 billion.
State-owned telecommunication firm PT Telkom was up Rp 75 over the week at Rp 3,725 while PT Indosat was up Rp 400 at Rp 8,650.
Cigarette-maker Sampoerna was up Rp 25 over the week at Rp 4,025 while rival Gudang Garam ended flat at Rp 9,200.