Local markets ends higher following peaceful rally

JAKARTA (JP): The Indonesian financial markets gained ground yesterday, with the rupiah breaking the psychological barrier of 14,000 against the U.S. dollar and stock prices increasing, after fears of more social unrest proved groundless.

Currency dealers said the rupiah rose to the day's high of 13,700 to the dollar before closing at 13,800/900, up from Friday's close of 14,100.

Dealers said offshore players cut their long dollar positions because no incidents took place during the rally held by supporters of opposition figurehead Megawati Soekarnoputri, the ousted leader of the Indonesian Democratic Party (PDI).

"The market was relieved after learning that the rally by the PDI passed peacefully. It's good because previous PDI rallies have often turned violent," a dealer with a local private bank said.

Thousands of Megawati supporters staged a demonstration at her residence in South Jakarta yesterday after the police banned them from rallying in a public area in the heart of the capital.

The rupiah's rise, however, was not followed by the yen, which slid against the dollar to the 142 level from 140.36 on Friday, dealers said.

Dealers said that should the yen gain ground today, the rupiah could strengthen further to test the 13,500 level on expectations of good results from negotiations with Indonesia's donors in Paris later this week.

However, the rupiah's standing could also be undermined by the launch of an auction system for Bank Indonesia's short-term promissory notes on Wednesday, which could drag interest rates down.

Positive sentiment also spread to the Jakarta Stock Exchange, sending share prices on the exchange to a higher closing level.

The Jakarta main price index, the JSX Composite Index, closed 0.7 percent or 3.418 points higher at 482.981. Total trading volume stood at 154 million shares valued at Rp 267 billion.

Gainers led losers by 47 to 40, with 83 counters unchanged and 118 untraded.

Stockbrokers said the market was driven up by local investors who took firm buying positions on shares in companies with dollar valuations.

Bahana Securities' associate director and head of equity sales, Andre Cita, said the market was a bit cautious in the beginning but regained ground after followers of Megawati held a peaceful rally to commemorate the July 27, 1996 riots when at least five people were killed during a clash with security forces.

"In the beginning, people were a little bit cautious that today might be a down day. I think it's because everyone has been anticipating July 27 and expecting it to have quite dire social consequences.

"Fortunately, things have so far remained relatively stable, and you know, every time you have stability, you'll have the market, or at least some segments of it, doing okay."

However, he warned that an upward trend could only be seen in a small fraction in the market while the overall trend was static as investors waited for a clear direction on financial reforms, particularly in the banking sector.

Most foreign investors remained on the sidelines.

Cita said local investors had been dominating the market for some time and were especially targeting stocks of companies with strong dollar earnings and lower dollar debts.

"If you look throughout the market, you'll see that we are following a very similar pattern, that is the U.S. dollar income earners are outperforming the rest of the market."

Companies which he expected to continue performing well in the market were those working in the mining sector like state general mining firm PT Aneka and state tin mining company PT Tambang Timah. Shares in companies in the oil industry like PT Medco Energi Corp and the pulp and paper industry will also continue to be buoyant.

Tambang Timah shares jumped Rp 300 to Rp 9,200 on 573,500 shares traded and Aneka Tambang shares rose Rp 75 to Rp 2,650 on 21.26 million shares traded.

Medco Energi shares rose by Rp 550, or 23 percent, to Rp 2,950.

Shares in paper manufacturer PT Pabrik Kertas Tjiwi Kimia rose Rp 500 to Rp 3,150 on 4 million shares traded.

Trading in rayon producer PT Inti Indorayon Utama was suspended yesterday afternoon following a sharp rise in the companies share prices.

Indorayon rose 40.5 percent or Rp 375 to Rp 1,300 on 193,000 shares traded when the suspension came into force.

Despite increases in second line stocks, heavyweight state- owned market leader in domestic telecommunications PT Telkom slid Rp 25 to Rp 4,350 on 3.8 million shares traded. (rid)