IBRA sales predicted to lift rupiah

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.