Political tensions push rupiah down against dollar
JAKARTA (JP): High anxiety over the precarious situation during the Special Session of the People's Consultative Assembly (MPR) weighed heavily on market sentiment on Thursday, with the rupiah closing down at 7,900 against the U.S. dollar and share prices falling 1.3 percent.
Currency dealers said the rupiah -- which rallied on Wednesday despite the simmering political tension -- failed to sustain its gains as most market participants were scared to build a new position.
"I think market participants are a bit scared to enter the market as the political tension is getting worse," a dealer with a local private bank said.
Dealers said the rupiah could have broken through the psychological 8,000 level against the U.S. dollar on Thursday had state banks not come to its defense.
The rupiah, which hit an intraday high of 7,650, finally closed 1.9 percent lower at 7,900 against the American dollar on Thursday, compared to Wednesday's 7,750 close.
Trading volume remained thin as most operators adopted a wait- and-see attitude until the conclusion of the session on Friday.
As the 1,000 members of the MPR entered the penultimate day of their meeting to set new electoral laws and determine the date for the general election next year, thousands of students and reform leaders stepped up their opposition to the session. They claim it favors the ruling Golkar grouping and the military in maintaining the leadership status quo.
They are also demanding the Assembly scrap the Armed Forces dual socialpolitical role and prosecute former president Soeharto for alleged massive abuse of power and corruption during his 32- year rule.
On Wednesday, 14 people were injured when security personnel clashed with students protesting the session. More clashes were reported on Thursday.
Dealers said sentiment on the rupiah would remain bleak for the rest of the week and it was predicted to descend to the range of 8,000 to 8,500 before the weekend.
Like the rupiah, share prices on the local stock market also declined. The Jakarta Stock Exchange (JSX) Composite Index fell 5.03 points to 356.98 on a total turnover of 439.12 million shares valued at Rp 454.23 billion (US$57.49 million).
Losers led gainers by 80 to 20 with 82 stocks unchanged.
Stockbrokers said that the decline in stock prices was caused by panic selling by investors who feared the growing anti-MPR session demonstrations would cause chaos.
"We still saw some program buying in the morning, but profit taking and panic selling in the afternoon reversed the sentiment," sales manager of Mashill Jaya Securities Antonio Yongnata said.
He said stocks of mining firm Aneka Tambang, Astra Agrolestari and state telecommunication firm PT Telkom, which made gains on preceding days, declined on Thursday.
The share price of Aneka Tambang shed Rp 50 to Rp 1,475 on 9.31 million shares, Astra Agro Lestari slid Rp 50 to Rp 2,275 on 877,500 shares and Telkom fell Rp 25 to Rp 2,450 on 38.78 million shares.
Antonio said investors would likely continue dumping their stocks on Friday ahead of the weekend to cash in profits on gains made the previous day.
"The stock market is likely to decline on persistent profit taking ahead of the weekend," he said. (aly)