Revised state budget fails to amaze currency market

Sat, 24 Jan 1998, 00:00 WIB | Source: JP

JAKARTA (JP): The government's announcement of a revised
1998/1999 draft state budget failed to wow the market as the
rupiah continued its downward trend, touching to as low as 15,000
to U.S. dollar yesterday.

Stock prices on the Jakarta Stock Exchange (JSX) had a similar
cool response to the revised budget, gaining a mild 1.7 percent
on foreign institutional investors' selective buying of Telkom
shares, stockbrokers said.

"The market remains cool after the government announced the
revised draft budget yesterday as the market is largely concerned
with the mounting private sector external debt," a chief dealer
with a local private bank said.

The spot rupiah ended at 13,000/13,500 in Jakarta against an
opening of 12,500/12,800 after nearly plunging to 15,000 during
midday trading.

The rupiah opened in London at 15,100/15,800.

Dealers said the rupiah managed to recover after Bank
Indonesia, the central bank, stepped in the market through state
banks at 14,000, 13,000 and 12,750 levels yesterday.

"The central bank sold a limited amount of dollars for the
rupiah. With thin trading volume and a wide trading band, small
intervention proved to be effective to arrest the rupiah's fall,"
a dealer said.

The rupiah crashed to a historic low of 17,000 on Thursday
before recouping to 12,000 at the close due to the central bank's
intervention, dealers said.

Dealers said the central bank was seen in the market in the
last three days to defend the rupiah from further attacks.

"But such intervention will not bear any fruit in the long
term as the rupiah is already above 10,000. Persistent
intervention will only result in a decline of the government's
foreign exchange reserves," a state bank dealer said.

Most currency dealers attributed the persistent fall of the
rupiah in the last few days to overseas players' continuing
worries over the ability of Indonesian companies to pay their
external debts.

"The private sector external debt is the key factor in the
rupiah's continuous fall. Unfortunately, the government has not
announced any concrete measures as to how to solve this crucial
problem," the dealer said.

Indonesia has a total external debt of US$140 billion as of
the end of 1997, with the private sector accounting for at least
$66 billion.

The government has said it would help debt-ridden private
firms negotiate with foreign creditors, but ruled out any
corporate debt bailout.

As the rupiah sank, stock prices on the JSX rose higher with
the benchmark index rising 7.45 points to close at 450.98
yesterday.

Over 362.34 million shares changed hands in the regular market
valued at Rp 603.42 billion ($46.41 million).

"The rise in the stock price index is largely attributed to
foreign institutional investors' heavy buying of Telkom shares,"
head of sales of BZW Niaga Securities Adnan Tan said.

"The increase of the index does not necessarily show that
foreign investors' confidence has returned to Indonesia. Foreign
investors are still cautious with the local market," he said.

Some analysts said there was no single listed company on the
exchange which could still survive and operate with positive cash
flow amid the fall of the rupiah.

"With the rupiah's exchange rate at over 10,000, most listed
companies have technically gone bankrupt," an analyst who asked
for anonymity said.

"It will be a story with a bad ending for listed companies in
Indonesia," he said. (aly)