Reforms fails to impress rupiah and stocks
Reforms fails to impress rupiah and stocks
JAKARTA (JP): A new reform measure announced by the government
yesterday failed to impress financial markets yesterday, with
both the rupiah and share prices losing ground in moderate
trading.
"The price of the rupiah in the market has been discounted by
the high expectation of the market on the visit of IMF officials
to Indonesia," a currency dealer said.
The government announced transparent and concrete economic
measures yesterday ranging from a more realistic review of the
1998/1999 state budget proposals to curtailing government
financial support for the national car project and scrapping some
agricultural monopolies.
The rupiah failed to maintain extended three-day gains
falling to as low as 8,450 to the U.S. dollar in the afternoon on
a combination of high dollar demand by local corporations and
Standard & Poor's downgrade rating of Indonesian banks.
The spot rupiah closed at 8,450/8,700 after crossing the 8,000
psychological level against an opening of 7,200/7,400 in the
morning.
"But volume remains thin with very limited transactions," a
dealer said.
The rupiah strengthened to as high as 6,950 against the dollar
shortly after President Soeharto announced the economic reforms,
but then fell to 8,450 in the afternoon.
"It's just a pity that good news on economic reforms announced
by the government failed to put the rupiah on an upward trend,
because Standard & Poor's announced the downgrade rating of
Indonesian banks," another dealer said.
As the rupiah fell, stock prices on the Jakarta Stock Exchange
also descended after a three-day rally on profit taking, with the
main price index falling 13.74 points to close at 387.243 from
403.98 the previous day.
"Stock prices will not continue to go up. After making a
three-day rally, today (yesterday) was the time for investors to
take profits," head of research at Trimegah Securities David
Chang told The Jakarta Post.
Stock brokers attributed the fall of stock prices to profit
taking by most investors.
"The rise of stock prices in the last three days was supported
by an increase in blue chips and today's (yesterday's) fall was
driven by the fall of most blue-chip stock prices," a broker with
a local brokerage firm said.
Other currencies
Other Asian currencies also headed back downhill as optimism
over Indonesia's fresh commitment to IMF-sponsored economic
reforms quickly evaporated, leaving only demand for the U.S.
dollar, Reuters reported yesterday.
President Soeharto said after a meeting with IMF chief Michel
Camdessus the government would cut subsidies on fuel imports, end
tax benefits under the national car program and dismantle
monopolies in basic commodities except rice.
Analysts hailed the measures as a step towards restoring
confidence in Indonesia and in the region's financial markets.
"All the ingredients are there to turn the boat around. But it
needs a follow-up, particularly on the debt strategy, which has
not been addressed," said Christa Marti, economist at UBS
Securities in Singapore.
The Malaysian ringgit slid to 4.300/400 per dollar from
4.2150/250 five hours earlier and 4.2900/3400 late on Wednesday.
Dealers said trade was very thin and choppy, but the ringgit's
weakness was contained by buying of the ringgit/Singapore dollar
cross.
The Singapore dollar fell sharply to 1.7660/90 to the U.S.
dollar from 1.7435/85 five hours earlier and levels of 1.7475/525
late on Wednesday.
"There was buying of ringgit/Sing because it's been down for
so long and some interbank players were trying to cover their
short positions (in dollar/Sing)," a U.S. bank dealer said.
The Thai baht softened to 52.90/53.15 to the dollar onshore
against 52.70/53.20 late on Wednesday. Offshore baht weakened to
51.60/53.10 after breaking above the 50.00 level in early trade.
The Philippine peso extended its recent rally to 41.50 per
dollar against Wednesday's 42.35 close as corporate demand for
dollars subsided and regional sentiment improved.
The Philippine Monetary Board said it would allow exporters to
open non-deliverable forward contracts as long as they sold a
corresponding amount of dollars in the spot market.
The South Korean won ended firmer at 1,605 per dollar from a
previous 1,671 close on inflows of foreign portfolio funds as
efforts to resolve Korea's debt problem gathered pace.
The Finance Ministry said Korea's usable foreign reserves
would reach $24 billion at the end of March and $40.7 billion at
year-end. Usable reserves stood at $8.87 billion at end-1997.
The Taiwan dollar ended higher at T$33.980 to the U.S. dollar
against a previous T$34.094 close, helped by the stock market's
extended rebound and foreign funds' net buying.
The Hong Kong dollar strengthened to 7.7405/25 from an opening
7.7455/75. Interest rates rose amid rumors that property company
Sino Land had defaulted on its loans.
A company executive denied the rumors overnight but they
dragged the blue chip Hang Seng Index down by seven percent.
The Indian rupee remained weak at 40.28/31 to the U.S. dollar
despite the central bank's intervention. (aly)