Local financial market gains ground as stocks rise 1.1%

JAKARTA (JP): The country's financial market gained footing on Friday with the rupiah moving to 9,025 against the U.S. dollar as stock prices rose by 1.1 percent.

Currency dealers said signs of improvement on the country's political and economic fronts have offered more leeway for the rupiah to gain ground against the American dollar.

Dealers said that the rupiah, which opened lower at 9,200/9,300, managed to break through the 9,000 level to hit an intraday high at 8,800 as offshore operators continued to unload their holdings after learning that the country's House of Representatives had passed the much-debated new political bills into laws.

"Some attributed the rupiah's strong gain to positive news on political conditions, but I think it was because certain offshore players were afraid of the imposition of a capital control system," a chief dealer with a joint venture bank said.

The dealer added that rumors circulating in the market on Friday said Indonesia was considering to opt for an adjusted Malaysian-style capital control system.

Those rumors forced many offshore operators, who had speculated on the rupiah in the past few weeks, to frantically sell their dollars, the dealer said. Nevertheless, he added, most local operators did not believe the rumors.

Currency dealers said that dollar selling by certain state banks also helped the rupiah to strengthen against the American dollar though its fate in the medium and long term remains dark.

"Several state banks sold their dollars at the 8,900 level," the dealer said pointing out that such dollar-unloading brought the rupiah to an intraday high of 8,800.

However, the rupiah was slightly weaker at 9,050 against the American dollar at the end of trading, though firmer compared to its close at 9,225 the previous day.

Dealers and financial analysts said that sentiment on the rupiah remained bearish in the medium and long term with trading range expected to be between 9,000 and 9,500 against the dollar.

Taking the lead of the rupiah, share prices in the local stock market also rose 1.1 percent on Friday with the Jakarta Stock Exchange (JSX) Composite Index ascending 4.66 points to close at 411.93.

Trading volume reached 288.19 million shares changing hands, valued at Rp 271.69 billion.

Gainers led loses 48 to 38 with 83 stocks remaining unchanged.

Despite the rise in the main price index, the biggest-cap stock, state-owned local telecommunications giant PT Telkom, inching down Rp 25 to close at Rp 3,300 on 10.6 million shares traded.

State-owned international call operator PT Indosat, meanwhile, gained Rp 775 to reach Rp 11,150 with 2.9 million shares traded.

Ciggarette maker PT Gudang Garam was unchanged at Rp 10,800 on three million shares, while competitor PT HM Sampoerna rose Rp 300 to Rp 5,700 on 15.5 million shares.

Stockbrokers said local share prices were boosted by bullish sentiment in the regional equity markets.

"There were some buying programs by investors to benefit from the rise in regional markets," Vonny Juwono, an institutional sales broker with Trimegah Securindolestari, said.

Stock analysts said that the dire political and economic situation at home has forced most investors into speculative trading rather than pure investment tactics.

The head of research at Panin Sekuritas, Anton Karlam, said that economic and political reform plans have not sufficiently assured foreign investors to be comfortable in the local stock market.

"Investors do not find any meaningful guide to invest here," he said. (aly)