Protests over price hikes to haunt rupiah and stocks: Experts

A'an Suryana, The Jakarta Post, Jakarta

Stock investors are expected to take a cautious approach this week amid growing protest over utility price hikes and a controversy over the recent sale of government shares in state- owned telecommunications firm PT Indosat.

Ferry Latuhihin, a stock analyst at Danareksa Research Institute, said on Sunday that the telephone rate increase would drive investors toward telecommunications stocks, but the positive sentiment would be overshadowed by uncertainty.

Earlier this month, the government raised fuel prices, electricity and telephone rates in a bid to cut expensive government subsidies and avoid putting state utilities in financial difficulty. But the policy has been criticized by the opposition, students and labor unions.

The sale of a 41.9 percent stake in Indosat has also been strongly criticized by the opposition and some company employees, who have demanded the government cancel the transaction, partly due to the lack of transparency.

"Investors will stay on the sidelines this week. They will only come back if the Indosat controversy is put to an end," said Ferry.

He said that the positive sentiment toward the telecommunications sector would probably help the stock index move up by only 10 to 15 points.

"It will help lift the stock index as the revenue of telecommunications companies will likely be on the rise," he said.

The positive sentiment was accompanied by Bank Indonesia's move to reduce interest rates, he added.

The Jakarta Stock Exchange composite index ended on Friday at 407.512, down 17.433 points or 4.1 percent from the previous Friday.

Daily volume in the two-day trading week averaged 180.5 million shares worth Rp 202.5 billion rupiah (US$22.7 million), compared with 420.8 million shares valued at Rp 385.1 billion during the previous week.

Meanwhile, the currency market will be flat this week in the absence of fresh leads.

"If there is no big news, the rupiah rate will remain stable this week at a range of Rp 8,900 to Rp 8,950 (to the U.S. dollar)," said Farial Anwar from the Currency Management Group.

Farial said the Indosat controversy and protest over the utility rate hikes had shaken investors.

However, he said that the protest was still within a tolerable limit for the moment.

Farial also believed that the rupiah rate would not go over Rp 8,900, as Bank Indonesia had enough foreign currency to intervene in the market.

He said Bank Indonesia's foreign exchange reserves had reached US$31.7 billion, well above the previous $30 billion threshold.

The rupiah ended steady on Friday after a range-bound session due to a lack of fresh incentives to move the market. The dollar retreated from its early session highs against the rupiah, but still finished stronger on the day.

The rupiah was quoted at Rp 8,920 per dollar, up from Rp 8,915 late Thursday, but off its intraday high of Rp 8,950.

The rupiah was Asia's best performing currency against the dollar in 2002.