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.