Profit taking by investors hits stock market, rupiah up slightly
JAKARTA (JP): Share prices continued their rally in morning trading on Friday but ultimately ended the week lower as the euphoria faded over Megawati Soekarnoputri's election to the vice presidency.
Securities analysts said the positive reception to Vice President Megawati still dominated trading in the morning, pushing up most share prices.
"But selling pressure, which hit in the afternoon session, cut down the earlier gains," one of the analysts said, adding that selling positions were mostly taken by local investors to secure profits.
Dealers said the Jakarta Stock Exchange Composite Index surged 4 percent before the end of the morning session but fell in the afternoon to close at 604.18, a 2 percent decline from the previous day's close of 616.49.
The rupiah closed only a touch higher against the U.S. dollar in volatile trading as profit taking also cut rupiah gains, dealers said.
After rising to a four-month high of 6,725 to the dollar earlier in the day, the rupiah closed at 6,900, only a tad higher than the 6,950 on Thursday.
Dealers said they believed the rupiah would strengthen further when international donors resume lending the country.
The deputy head of the International Monetary Fund (IMF), Stanley Fischer, said on Thursday in Washington that he hoped to see a resumption in IMF credits to Indonesia "in a matter of weeks".
He said the political outlook for the country could be "encouraging if there is political support for this government".
Analysts said that the stock prices lost ground due to the lack of foreign investor participation and the absence of fresh trading incentives.
"Foreign investors are mostly still adopting a wait-and-see attitude. They need clear information about the new Cabinet before entering the market," one said.
Adrian Rusmana, an equity analyst at PT BNI Securities, said he believed trading would remain flat until the announcement of the new Cabinet.
"The price index in the coming days would be flat on 600 points or down just a little," he said.
The market's focus now, Adrian said, was clearly the formation of the new Cabinet under the leadership of newly elected President Abdurrahman Wahid, known as Gus Dur.
"But at least the market now has a new hope that the country will be politically stable under the new leadership of Gus Dur and Megawati," Adrian said.
Analysts said the establishment of a credible Cabinet would be a key factor in the future direction of both stocks and rupiah or else the country would not be able to emerge from the prolonged crisis.
The government faces the daunting and immediate task of tackling mountains of sovereign debt which threaten to cripple the country's fragile economic recovery.
The challenge to the new government, they said, was to restructure the hefty government debt and to tackle the sharp rise in debt servicing payments.
The country's scheduled principal repayments on public external debt will shoot up to US$5 billion next year, from the current $2 billion a year, according to ratings agency Standard & Poor's Corp.
The amount will rise to $9 billion each year for the years 2001 and 2002.
Servicing such debt will place a heavy burden on the government which has been scrambling among foreign lenders to get $10.3 billion to plug the budget gap for the fiscal year ending March 31, 2000.
The sharp spike in debt payments will come after the expiration in March next year of the two-year moratorium on principal payments that Indonesia and its lenders agreed to last year at the Paris Club meeting of creditor nations.(udi)