Rising political tension pushes rupiah down again

Rising political tension pushes rupiah down again

JAKARTA (JP): The rupiah lost further ground against the U.S.
dollar yesterday in tandem with the rising political temperature
and stock prices continued their decline on profit taking.

Analysts said the market was under pressure again ahead of an
extraordinary convention of the ruling Golkar grouping, where
political intrigues are heightening.

Currency dealers said the rupiah sank to a day's low of 15,700
against the U.S. dollar in a thin market before recovering in
late afternoon to close at 15,150/250. The rupiah closed
Wednesday at 15,000.

"There are no other major factors affecting the fall of the
rupiah today other than political intrigue inside Golkar ahead of
its extraordinary convention," said a currency dealer with a
local private bank.

Golkar is beset by an internal power struggle between
reformists and former president Soeharto's allies. Many parties
fear Soeharto's faction could win the struggle and maintain the
old practices of poor governance.

Sigma Batara Securities' head of research Fadjar Limin Sutandi
said the internal struggle inside Golkar only worsened the image
of the political situation, at least in the eyes of foreign
investors.

They will not invest in the rupiah or return to Indonesia if
economic and political uncertainties prevailed, he added.

"What Indonesia needs to do now is to create a conducive
climate for investment. If we have a good investment climate,
money will flow in automatically."

Fadjar disagreed with the government and others' calls for
Chinese-Indonesians to bring back their money from offshore banks
to activate the country's economy instead of serious efforts to
improve the investment climate.

"Even if all Indonesian people deposit their money in
Singapore, if our investment climate is good, banks in Singapore
will return the money to Indonesia."

Dealers said other factors affecting the rupiah yesterday
could be the weakening Japanese yen and prevailing concerns over
the secessionist movement in Irian Jaya.

They said many offshore investors dumped their rupiah
investment because of negative developments on the political
front.

Meanwhile, stockbrokers said profit-taking continued to plague
the Jakarta Stock Exchange (JSX) yesterday.

The JSX Composite Index closed down 2.659 points at 470.321.
Turnover totaled 215.2 million shares valued at Rp 323.65 billion
(US$21.5 million).

Fadjar predicted that profit-taking would continue to rule the
market this week but the main price index would remain above the
support level of 450 points.

Push factor

"There is no real push factor at the moment like what happened
last week with the privatization of PT Semen Gresik."

Local investors cashed in on profits made by the state-
controlled cementmaker, which pushed down its stock price by Rp
50 to Rp 11,950.

Semen Gresik's shares soared Tuesday on the back of the
government's announcement Friday that it had selected Mexican
cementmaker Cemex SA as the preferred bidder for a 35 percent
government stake in the firm.

Listed state companies that are part of the government's
privatization program, like gold and nickel miner PT Aneka
Tambang and tin miner PT Tambang Timah, continued to be the focal
point of trade.

Aneka Tambang topped the list as the most actively traded
stock for a second day with 20 million shares traded amid rumors
that the government and a foreign investor would soon announce a
deal on the company. The stock gained Rp 50 to close at Rp 2,000.

Trading on Bank Tiara Asia, one of the problem banks under the
supervision of the Indonesian Bank Restructuring Agency, was also
on the rise following news that foreign investors were in
negotiation with the agency to purchase some stake at the bank.

Trading on the bank was suspended temporarily when its prices
soared by more than 50 percent. The bank rose Rp 50 to close at
Rp 125 on 2.2 million shares traded.

Heavyweight state-owned telephone monopoly PT Telkom stayed
unchanged at Rp 4,350, and state-owned satellite operator PT
Indosat also held firm at Rp 17,800.

Cigarette giant PT Gudang Garam slipped Rp 175 to Rp 9,100 and
competitor PT HM Sampoerna dipped Rp 75 to Rp 2,250. (rid)