Local financial mart caught in regional rut

JAKARTA (JP): The local financial market teetered again on Monday with the rupiah weakening to 8,550 against the U.S. dollar and stock prices sliding 1.4 percent.

Currency dealers said most offshore operators dumped the rupiah for the whole trading day following the yen's slide against the U.S. dollar.

Dealers said state-owned banks were seen selling dollars at Rp 8,920 down to Rp 8,850, to defend the local unit.

"Foreign banks started the day's trading buying dollars. I think the factor is very much regional," a dealer with a local private bank said.

"This action forced state banks to step into the market, selling the dollar when it reached Rp 8,925. This pushed the rupiah back below 8,900."

The rupiah closed at 8,850 against the greenback in the spot market here, slightly weaker than Friday's close at 8,700.

An analyst with a local securities house said the market was a bit disappointed that the government could not secure larger loans from Japan to plug the deficit in the next state budget.

Japan's deputy finance minister for international affairs, Eisuke Sakakibara, said Friday that Japan was committed to providing Indonesia with a US$2.4 billion loan.

"This means that the government has to go a long way to the World Bank, the Asian Development Bank and even the International Monetary Fund to help finance the gap," the analyst said.

Dealers said the market would continue to test the rupiah in the coming days as the central bank is expected to continue defending the currency. The resistance level of the rupiah is seen at 9,000 to the dollar.

Following the rupiah's slide, local share prices dropped 1.4 percent as foreign investors continued discharging their investment holdings here.

The Jakarta Stock Exchange composite index closed down 5.863 points at 399.690.

Trading volume totaled 149.78 million shares worth Rp 222.93 billion changing hands.

Stockbrokers and analysts attributed the fall in local stock prices to regional bearishness, and the weakening trend of the rupiah.

An institutional sales broker at Trimegah Securindolestari, Vonny Juwono, said the fall in the local market was exacerbated by the fall in the heavyweight PT Telkom, which accounts for some 17 percent of local market capitalization.

"We just lacked positive incentives to start buying," she said.

Bahana Securities associate director and head of equity sales, Andre Cita, said foreign investors who came into the local market in the last few weeks are now unloading their investment holdings due to various economic and political concerns.

"We haven't touched the bottom, and we don't know where the bottom is. You know there are still concerns about the currency, social unrest, and so on.

"Those concerns are reflected in the stock market, and foreign institutional investors are on the selling side today," he said.

He said those investors backed local stocks a few week ago when they expected that the rupiah to strengthen. But now, they have started to doubt it and see the risk that the rupiah is getting weaker.

"They don't want to take that risk, so today, they are selling their stocks."

Cita said the outlook for the local market would remain gloomy in the short term. Unless, there are some positive surprises, the outlook would not change.

"So, there is a cloud hanging over the Jakarta Stock Exchange." (rid)