Rupiah and stock prices continue to drop

JAKARTA (JP): The rupiah and stock prices continued to drop yesterday following rioting in Ujungpandang, South Sulawesi and ongoing regional weaknesses, dealers and brokers said.

Despite positive signals sent by the government Tuesday, the fate of the currency and stock markets were still largely dependent on regional trends, they said.

Sentiments were still in favor of the U.S. dollar, with local and foreign players keeping their dollar holding.

Spot rupiah closed at 2,980/2,985 against the U.S. dollar yesterday, compared with an opening of 2,970/2,978 and Tuesday's close of 2,950.

Meanwhile, share prices on the Jakarta Stock Exchange dropped by 1.51 percent, with the composite index falling 8.09 points to close at 526.74.

Total trading turnover was Rp 289 billion (US$97.90 million), compared with a usual daily trading volume of over Rp 500 billion.

A stock analyst with a joint venture brokerage firm said trading activities on the exchange were meager because most investors stayed on the sidelines due to the Ujungpandang riots, spending cuts and further weakening of the rupiah.

He said government measures so far, including a US$35.60 project rescheduling, should be enough to convince investors the government was serious in dealing with the currency and stock market upheavals.

But investors, especially foreign investors, were disappointed with the government's unfulfilled promise to dismantle the National Logistic Agency's (Bulog) trading monopoly on a number of agricultural products.

Foreign investors were also dissatisfied with the government's decision not to reschedule the national car project.

"For us, Indonesian investors, it is understandable that the national car project will go on and Bulog's monopoly will remain and we are satisfied enough with what the government has done so far," he said.

He said the main concern now was how to stabilize the currency and reduce banking interest rates to boost the stock market and businesses in general.

Meanwhile, currency dealers said further slides in Malaysian ringgit and Thai baht continued to undermine rupiah sentiment yesterday.

Tomorrow and today rupiah closed at 2,981/2,986 and 2,980/2,985, respectively.

But dealers warned the rupiah's continuing decline was slightly exaggerated by thin trading volume, at one or two million dollars.

"The market was very quite today. It was practically closed at 3:30 p.m. as nobody quoted new prices until then," a local bank dealer said.

He said most local players were reluctant to open a new position given the current uncertainty as they did not want to risk further losses.

Dealers said sustained domestic demand for dollars limited the downside risks for the U.S. currency, adding the 3,000 barrier could again be tested.

They said offshore operators had guarded the rupiah at the 2,980 level for days, but strong local demand seemed to outweigh their endurance.

Dealers said swap rates drifted lower on improved rupiah liquidity and the possibility of lower interest rates.

Overnight rupiah was between 20 percent and 25 percent. Tom/next swap at 0.9/1.0 points. One-week swap was at 6.50/6.75, one-month at 33/37, two at 68/77, three at 100/105, six at 190/197 and one-year at 340/380 points. (aly/rid)