Rupiah again passes 6,000 level as stocks strengthen

Rupiah again passes 6,000 level as stocks strengthen

JAKARTA (JP): The rupiah continued to decline further against
the American dollar on the first trading day of 1998 yesterday,
passing the 6,000 barrier on continuing corporate demand for the
greenback.

Stock prices on the Jakarta Stock Exchange (JSX) gained ground
on window-dressing activities, with the main index closing 2.07
percent higher.

Currency dealers said corporate dollar buying to pay dollar-
denominated debts remained high in the currency market, pushing
the rupiah further down.

Dealers said that the central bank was not seen in the market
yesterday.

Spot rupiah closed at 5,850/5,925 to the greenback after
plunging to a day low of 6,075 in the morning, compared to the
opening of 5,650/5,850.

"It is really difficult to see the direction of the rupiah
though people expected to see a strengthening rupiah at the
beginning of this year," a dealer with a local private bank said.

"The market is still determined by demand and supply
principles; fundamentals do not speak yet in the market," a chief
dealer with a local private bank said.

But most dealers said that trading remained thin as many
operators were still on their yearend holidays.

Trading volume was expected to rise next week as more and more
indebted firms would enter the market to cover their positions,
they said.

Many analysts have blamed the indebted corporations for the
sharp depreciation of the rupiah against the U.S. dollar. The
rupiah has lost 55 percent of its value against the greenback
since last July.

The government has said that Indonesia's private offshore
debts total US$65 billion, accounting for 55 percent of the
country's total debts of $118 billion.

The president of Paribas Asia Equity, Jasereh James Spence,
said in a statement yesterday that previous reports about
Indonesia's total debts which stood at US$200 billion were
groundless.

"The inclusion of the rupiah-denominated papers held in
foreign hands would increase the official estimate of US$117
billion by a maximum of $10 billion which would result in total
indebtedness in both rupiah and foreign currencies of around $130
billion," he said.

Dealers also attributed the weakening of the rupiah to the
downgrade by Standard & Poor's on Indonesia's long-term foreign
currency rating to BB-plus from BBB-minus and its local currency
rating to BBB-plus from A-minus.

As the rupiah weakened, stock prices on the JSX gained 2.07
percent, with the JSX composite index rising 8.29 points to close
at 410.01.

Total turnover was 161.67 million shares changing hands on the
regular market, valued at Rp 173.07 billion (US$29.83 million).

Stockbrokers said that the market opened 1998 trading with an
expectation of a better 1998/1999 state budget to be announced by
President Soeharto on Jan. 6.

"I think the increase in stock prices is due to a positive
expectation for the announcement of the 1998/1999 state budget
next week," Karman Pamurahardjo, an analyst from Harita
Securities, said.

Karman said overall market sentiment remained negative given
the persistent weakening of the rupiah in the currency market.

Stock brokers said the government's decision to announce the
merger of four state banks on Wednesday slightly boosted prices
of most banking stocks yesterday.

But the real impact of the merger would be felt when its full
details were disclosed by the government later this year.
(aly/rid)

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