Peaceful election boosts rupiah, stock market

Peaceful election boosts rupiah, stock market

Rendi A. Witular, Jakarta

The local currency and stock market edged higher on Tuesday
after the country successfully completed what will probably turn
out to be the first round of its first direct presidential
election on Monday, generating positive sentiment in the market
and luring back foreign investors, market experts said.

Currency analyst Ferry Latuhihin of Bank Internasional
Indonesia said that the rally both in the currency and the stock
market was primarily fueled by political relief following a
trouble-free polling day.

"This is simply relief. The jitters over violence during the
election have faded away, boosting investor confidence in the
local market and easing political uncertainty," said Ferry.

Ferry added that the market was also comfortable after it
became clear that presidential candidate Susilo Bambang Yudhoyono
would almost certainly be in the runoff on Sept. 20.

Former general Susilo, who is also a former top security
minister of incumbent president, Megawati Soekarnoputri, appears
to the favorite of the financial market. So far, he is leading in
the preliminary ballot count.

Due to the positive sentiment, the rupiah at one point in the
day strengthened to beyond the psychologically important level of
Rp 9,000 per dollar, briefly touching the Rp 8,920 level.

But as some investors engaged in profit-taking, the local unit
ended the day at Rp 9,020, still 1.4 percent higher than Friday's
close of Rp 9,150. The market was closed on Monday for the
presidential poll.

The local currency's new-found vigor compared to last week was
in marked contrast to previous weeks, which saw the rupiah
damaged by expectations of an aggressive rate hike in the United
States, and security concerns ahead of the election.

Ferry expected the rupiah to be traded at between Rp 8,838 and
Rp 8,850 per dollar over the remaining months of the year.

"These rates are generally fair for both exporters and
importers. We should not be hoping for the rupiah to go back to
Rp 8,400 or Rp 8,500 in the short term as this would only attract
speculators," said Ferry.

On the stock market, the Jakarta Composite Index continued its
rally, after booking a 3 percent gain last week, mostly on the
back of a trouble-free election and positive regional sentiment,
an analyst said.

The Index skyrocketed by 23.230 points to end at 768.255, with
a volume of 2.37 billion shares worth Rp 1.53 trillion (US$170
million) being traded.

"The (stock market) gains are attributed mostly to active
buying in selected bluechips by foreign investors who are lured
back by the evidence that the earlier fears of disturbances were
baseless," said an analyst at a local brokerage firm, adding that
the Index would likely trade at between 770 and 780 over the next
couple of weeks.