Market reacts positively to new budget
JAKARTA (JP): The local bourse reacted positively to the 1999/2000 zero-growth State Budget announced by President B.J. Habibie early on Tuesday, with blue chips gaining ground in moderate trading.
The rupiah also perked up on news of the conservative budget, rising to Rp 7,825 against the U.S. dollar from Rp 7,925 at the close of the previous day's trading.
Share prices surged through the key 400-point level, ending 3.6 percent firmer as investors bought shares across the board.
"The market believed that all the macroeconomic assumptions in the 1999/2000 State Budget seemed realistic," a chief dealer with a joint venture bank said.
Money market dealers said the rupiah, which opened at 7,925/7,950, was dull in the morning trading session, but ultimately strengthened.
Dealers said the rupiah's gain could also be attributed to the 27-month high of the yen to the dollar.
The yen closed at 111.-- against the dollar on Tuesday, lifting regional currencies along with it.
"Besides the release of the State Budget, a strong yen was also behind the rise of the rupiah," one dealer said.
Financial analysts and dealers said macroeconomic assumptions unveiled by the government on Tuesday were still in line with previous government announcements, in which economic growth in 1999/2000 was expected to be flat, against the 12 percent contraction predicted for the current fiscal year ending in March.
Average inflation rate was forecast at 17 percent, down from 66 percent expected in 1998/99, and the rupiah was set at an average 7,500 against the dollar in 1999/2000 compared to 10,600 in the year to March.
"I think the rupiah rate of 7,500 seems very realistic although some may argue about it," the dealer said.
Taking their lead from the rupiah, share prices on the Jakarta Stock Exchange (JSX) soared, with the main benchmark price index rising 14.24 points to 408.70 on a total turnover of 221 million shares valued at Rp 191.47 billion ($24.54 million).
Advancers outnumbered decliners by 88 to 14, with 64 stocks unchanged.
Stock analysts and brokers said the market was bullish on Tuesday because the budget's macroeconomic assumptions were in line with the country's dire economic condition.
"The market was bullish, with most investors entering the market in the second session after the release of the government's state budget," said Vonny Juwono, an institutional sales broker with Trimegah Securindolestari.
Vonny said that several foreign brokerages, such as Lyonnais, Jardine Fleming Nusantara and Danareksa, which had stayed away from the local market earlier this week, reentered on Tuesday with main buying targets of certain blue-chip stocks. (aly)