Miyazawa aid pledge fails to cheer embattled market

JAKARTA (JP): A bearish financial market persisted on Friday despite Japan's pledge to lend Indonesia US$2.4 billion from the Miyazawa Fund.

Currency dealers said the commitment failed to lift market sentiment as a rise in demand for the greenback from local and offshore operators continued to pressure the local currency.

"The rupiah managed to strengthen against the dollar on news of the Japanese aid commitment in early trading, but fell back in late trading due the rise in dollar demand," a chief dealer at a joint venture bank said.

The rupiah, which opened at 8,550/8,650, traded in a range of 8,450 and 8,750 during the entire trading day. It closed at 8,700, unchanged from Thursday.

"But trading volume was thin... with total volume of less than $100 million," he said.

Dealers said persistent dollar demand by local banks in their efforts to finance imports of raw materials and service offshore obligations halted the rise of the rupiah in early trading.

"The rupiah's outlook remains bearish, there is nothing changed," another dealer added.

Share prices on the local market also continued to slide for the second consecutive day as profit-taking dominated trading activities.

The Jakarta Stock Exchange Composite Price Index fell 4.47 points to close at 405.55 with transactions involving 201.62 million shares worth Rp 154.7.

Decliners outdistanced advancers 44 to 37, with 74 stocks unchanged.

Large-cap stocks ended the day trading mixed, with state-owned domestic telephone operator PT Telkom sliding Rp 75 to Rp 2,950 on 4.2 million shares traded and state-owned international call operator PT Indosat climbing Rp 50 to Rp 11,650 on 917,000 shares.

Car manufacturer PT Astra International closed Rp 25 lower at Rp 800 on 1.6 million shares traded. Cigarette maker PT HM Sampoerna dipped Rp 250 to Rp 5,700, and rival PT Gudang Garam slipped Rp 100 to Rp 11,450.

State-owned diversified mining firm PT Aneka Tambang closed Rp 25 at Rp 1,525, while state-owned tin miner PT Tambang Timah lost Rp 75 to close at Rp 4,700.

Stockbrokers said several foreign brokerage firms sold their stocks to reap profit on the gains they received early this week.

"Profit-taking ahead of the weekend pressure sent the stock prices down further," a broker with Trimegah Securindolestari said.

Stockbrokers said uncertainty in the country's economic and political front would remain a major barrier for offshore investors.

"It is difficult to find long-term investors at the moment as most investors prefer quick gains," Fitri Murniati, an analyst at BNI Securities, said.

Fitri said unresolved problems such as government's much- criticized banking recapitalization program, which is accused of a lack of transparency, not only scared investors away but further muddied the investment climate in Indonesia.

"There are a lot of things that remain unclear here," Fitri said. She added investors would only feel secure if the problems were resolved. (aly)