Local financial market perks up as yuan fears abate
Local financial market perks up as yuan fears abate
JAKARTA (JP): The local financial market regained some of its
recent losses on Tuesday, calmed after tremors subsided from a
rumored devaluation of the Chinese yuan.
The rupiah strengthened to close at 9,100 against the U.S.
dollar in thin trading and stock prices rose 4 percent, taking
heart from Wall Street's overnight gains.
Currency dealers cautioned that the rupiah failed to break the
9,000 boundary level despite its slight recovery.
Dollar demand by local commercial banks remained strong and
market anxiety of massive antigovernment demonstrations halted
the rupiah's advance.
"The rise of other regional currency markets helped the rupiah
to recoup on Tuesday, but fears that antigovernment protesters
will eventually go to streets remain," a chief dealer with a
joint venture bank said.
Currency dealers said the rupiah, which opened at 9,250/9,300,
weakened to as low as 9,325 in morning trade. It gained ground in
the afternoon after news from China it would maintain a strong
yuan.
"A bank in Singapore actively sold the dollar when it was Rp
9,300," the dealer said. The move helped to boost the flagging
rupiah.
Currency dealers said they were surprised to see persistent
dollar bids by local commercial banks, including several state
banks, which served to keep the currency under severe pressure.
"I think some state banks bought dollars to finance imports of
their customers, while other banks bought them for speculative
reasons," a dealer said.
Governor of Bank Indonesia Sjahril Sabirin said on Tuesday the
government would not step in to defend the rupiah despite the
currency's weakening against the dollar in the past few days.
"It is not right if we fight the market as the rupiah's weak
stance to the dollar was caused by external factors."
He said market intervention in such circumstances would be
futile.
Dealers said the rupiah's rise would be capped by continuing
speculation of massive antigovernment demonstrations in Jakarta
on Wednesday.
They predicted it would not be able to strengthen below the
9,000 level.
Taking their lead from the rupiah, share prices on the local
market rose 4 percent on Tuesday, with the Jakarta Stock Exchange
(JSX) Composite Index rising 15.67 points to close at 398.15.
Trading turnover totaled about 198.8 million shares worth Rp
207.7 billion.
Gainers outpaced losers by 56 to 23, with 62 stocks
unchanged.
Most large-cap stocks gained ground, with market leader,
state-owned telecommunications firm PT Telkom gaining Rp 75 to
close at Rp 3,350 on 13.6 million shares changing hands.
Stockbrokers attributed the rise to the general gain in other
regional equity markets following Wall Street's overnight gains.
"I think the rise of other regional markets was the main
reason for the rise of our market," said Suhendra, an
institutional sales broker with Trimegah Securindolestari.
But concerns over the rumored antigovernment protest had
forced investors, especially domestic ones, to take a wait-and-
see attitude.
Certain offshore investors, however, placed significant funds
on Tuesday through several joint venture brokerage firms like
Indosuez WICarr Securities, SBC Warburg, Merrill Lynch Indonesia,
Jardine Fleming Nusantara and ABN Amro.
"It was a bit surprising to see such buying programs by
offshore investors," Suhendra acknowledged.
Stock analysts were pessimistic about lasting bullish
sentiment because offshore fund managers remained skeptical over
prospects for resolving the country's political and economic
crisis in the long term. (aly)