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)