Political jitters affect rupiah, local stock prices

JAKARTA (JP): The rupiah turned volatile on Thursday and share prices continued their downward trend because of increasing political tension and prospects of social unrest, dealers and stockbrokers said.

They said the local financial market defied regional bullishness due to the domestic political temperature rising ahead of the Special Session of the People's Consultative Assembly (MPR) slated for Nov. 10 through Nov. 13.

A dealer with a local private bank said massive antigovernment demonstrations on Wednesday was a focal reminder for investors to take cautious steps when dabbling in the local market.

"Offshore operators who built long rupiah positions, are now scrambling for dollars to square their positions ahead of the MPR session," he said.

The rupiah, guarded by state banks for the whole trading day, ended Jakarta trading at 7,625, barely unchanged from its close on Wednesday.

Dealers said the rupiah hit an intraday low of 7,925 in early trading before the state banks jumped into the market and began selling dollars.

"Unless the state banks had sold dollars, the rupiah would have broken the 8,000 level," the dealer said.

"The 8,000 level is a critical point for the rupiah. Once that level is broken, it is very likely that our currency will continue sliding toward the 10,000 level."

As the MPR draws nearer, no offshore operators are risking being short on dollars against the rupiah, dealers said.

However, if the MPR session passes peacefully, investors should start returning to the currency and thus boost its value again.

During the convention, the MPR is scheduled to set the date for a general election. Political tension is rising because some groups have expressed their opposition to the convention.

In times of heightening political tensions, investors in the local battered stock market tend to adopt an in-and-out attitude, barely moving the main price index, as long-term investors have fled the market, stockbrokers said.

The Jakarta Stock Exchange Composite Index, the main gauge of the local market, closed down 2.878 points at 309.412 points.

With many foreign investors staying on the sidelines, the market looked very quiet, with the trading volume totaling 117 million shares valued at Rp 110 billion (US$14.4 million) -- far from the normal level of between Rp 300 billion and Rp 400 billion.

Losers easily led gainers by 51 to 38 with 72 stocks unchanged.

The head of research at Sigma Batara Securities, Fadjar Limin Sutandi, said: "I don't expect the market to recover until the MPR."

"The trend for the market is declining, both in value and volume," he said.

He said the direction of the local market was and would be totally determined by domestic factors, unlike in previous weeks when the market was moved by global strengths following rate cuts in the United States.

Most large-cap stocks ended lower on Thursday, with market leader domestic telecommunications provider PT Telkom sliding Rp 75 to close at Rp 2,025 on 5.7 million shares traded.

International call operator PT Indosat dropped Rp 50 to Rp 8,300 on 243,500 shares, mining firm PT Aneka Tambang also slid, Rp 25 to Rp 1,250 on 2.8 million shares.

Leading automotive firm PT Astra International gained Rp 25 to Rp 475 on 10.36 million shares, while pulp and paper firm PT Indah Kiat lost Rp 50 to Rp 1,725 on 9.1 million shares.

Cigarettemaker PT Gudang Garam dropped Rp 300 to Rp 7,400 on 301,000 shares changing hands, while competitor PT HM Sampoerna rose Rp 75 to Rp 2,975 on 2.9 million shares. (rid)