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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