Local markets continue to gain in strength

JAKARTA (JP): The Indonesian financial market yesterday sealed the week's gaining streak with the rupiah strengthening to 14,550 against the U.S. dollar and the stock market inching up 0.9 percent yesterday.

Analysts attributed the week-long rally to improving sentiment, both at the local and regional levels, as foreign investors started selecting quality investments in the region.

A currency dealer with a local foreign exchange bank said the rupiah strengthened to 14,375 against the U.S. dollar in early afternoon trading before settling at 14,500/600 at the close.

The rupiah started the week at 14,800 against the greenback.

"It's pretty much following the regional movement, especially the Japanese yen. Besides, domestically the overall situation is quite stable unless you look at Irian Jaya and East Timor," the dealer said.

Reports said at least one person was killed and two were injured during a clash between rioters and security forces in Irian Jaya on Thursday, while the situation was still tense in East Timor following the shooting of an East Timorese man by military agents Monday during a visit by European Union ambassadors.

Overall market sentiment, however, was quite positive yesterday following news reports that the World Bank approved a US$1 billion structural adjustment loan to Indonesia, currency dealers said.

The $1 billion loan is part of a $43 billion rescue package arranged by the International Monetary Fund (IMF) for Indonesia.

World Bank Indonesia country director Dennis de Tray said the IMF and the Group of Seven industrial countries would soon announce additional new loans of $6 billion on top of the existing package.

"That news should give a further boost to the rupiah. We expect the currency to continue booking gains next week provided political stability prevails," the dealer said.

Bank Indonesia Governor Sjahril Sabirin said earlier this week that political bickering was behind the continuing fall of the rupiah against the U.S. dollar and called on politicians to refrain from making comments or moves which could undermine the currency.

Share prices on the Jakarta Stock Exchange (JSX) also managed to book slight gains yesterday, with the JSX Composite Index closing 4.172 points higher at 470.545.

The market main index was still at 431.231 Monday.

Yesterday's trading turnover totaled Rp 368.1 million shares valued at Rp 352.49 billion (US$24.3 million).

For most of the day, however, shares traded lower as investors cashed in profits after a four-day rally of solid gains, stockbrokers said.

Bahana Securities associate director and head of equity sales Andre Cita said economic news was predominantly positive this week, such as an improving trade surplus and the resumption of international loans to Indonesia.

There had not been too many demonstrations on the political front as well, Cita said.

"In that environment, we saw foreign money coming into the market and pushing stock prices higher."

Cita noted that most investors coming here were chasing quality stocks which they still considered undervalued.

In near future, he said, the market may book some rises for a time before people realized that the economic fundamentals were not yet strong enough to sustain a rally.

"For the short term, people on the sidelines are moving in to participate. So, we will see more activity in the market. After that, I suspect the reality will set in and you will see a correction," Cita said.

Heavyweight state-owned domestic telephone firm PT Telkom was unchanged at Rp 4,350 yesterday, while international telephone operator PT Indosat rose Rp 300 to Rp 17,800.

Cigarettemaker PT Gudang Garam dipped Rp 100 to close at Rp 9550, while competitor PT HM Sampoerna gained Rp 25 rupiah to Rp 2,375.

Bank Internasional Indonesia lost Rp 25 to close at Rp 300, while state-owned Bank Negara Indonesia remained unchanged at Rp 300 and Bank Dagang Nasional Indonesia also stayed unchanged at Rp 75. (rid)