Market cheerless over IMF, ADB deals
JAKARTA (JP): Indonesia's financial market is unimpressed by a new deal between Indonesia and the International Monetary Fund (IMF) and a new loan agreement with the Asian Development Bank (ADB).
Analysts said yesterday despite a new deal with the IMF which would pave the way for more foreign assistance and a US$1.5 billion loan agreement with the ADB, fears of further instability and unrest were still keeping foreign investors at bay and crippling the local financial market.
Currency dealers said the rupiah weakened crossing the 15,000 level to 15,100 against the U.S. dollar in Jakarta market morning transactions before ending the day's trade at 14,700/900 -- exactly the same as its close on Thursday.
"The market was so quiet today (yesterday). Almost no one wanted to take a position amid news about riots in Samarinda and Gabion," a dealer with a local private bank said.
It was reported that tens of rioters attacked and looted a shopping center in Samarinda, East Kalimantan, yesterday. While on Wednesday, hundreds of fishermen set fire to trawlers, warehouses and an office in Gabion, Medan, North Sumatra.
Jeffrey Winters, professor of political economy at Northwestern University in the United States and a specialist on Indonesia, said here yesterday that investors did not regard Indonesia as politically stable and the IMF accord was not enough to lure them back.
"Yesterday, a new letter of intent was announced in Jakarta. And yet this morning the rupiah weakened rather than strengthened. In other words the markets have given their response -- which is once again negative.
"Domestic and foreign investors have made their own assessment and they have determined that, both politically and economically, Indonesia remains unstable," Winters was quoted by Reuters as saying.
The weak rupiah triggered arbitrage trading on dollar- sensitive stocks on the Jakarta Stock Exchange (JSX), especially giant state telecommunications firm PT Telkom which accounts for 17 percent of total market capitalization, stockbrokers said.
They said investors endeavored to purchase Telkom, considering its price tag in rupiah relatively cheap after it dropped Rp 250 to Rp 3,800 on Thursday. Telkom yesterday regained the Rp 250 to close at Rp 4,050 on 2.2 million shares traded.
Telkom's performance boosted the JSX composite index by 0.5 percent, closing 2.06 points higher at 430.87.
Trading turnover totaled 209.21 million shares changing hands at regular counters valued at Rp 161.1 billion (US$10.9 million).
Securities analysts said the increase in the local benchmark index did not represent the mood of the market as overall sentiment remained bearish.
"Foreign players remain largely on the sidelines as the IMF accord and a new loan from the ADB failed to have much impact on the market," a broker with a joint venture securities house said.
Bakrie Securities' trading manager, Helen Meiyana, agreed and said foreign investors' investment pattern was very much driven by regional development, like the Japanese yen factor, and the movement of the rupiah.
The yen yesterday was down again to break through the 143 level in early afternoon trading in Singapore.
However, Helen said, local investors had started to look for some quality companies which had continued to book profits and therefore had the possibility of distributing dividends.
"The local investors' buying mood could give a positive boost to our battered market," she said. (rid)