Rupiah and stocks stabilize on BI move

JAKARTA (JP): The rupiah and stock prices stabilized yesterday following Bank Indonesia's sporadic intervention in the currency market, dealers said.

The rupiah strengthened to close at 3,680/95 against the U.S. dollar in the spot market after plunging to a record low of 3,850 on Monday.

Currency dealers said the rupiah opened quite high at 3,600/85 due to a firmer close in New York and London overnight. The currency even strengthened in early trade to a high of 3,475.

"The market sentiment was still very much influenced by the central bank's continuing intervention, though very small," said a state bank dealer.

Currency dealers said the central bank emerged occasionally to sell dollars in small amounts, totaling about US$100 million. This kept operators wary of getting caught too long with dollars.

But they said the rupiah was still fragile because of a continued dollar demand by local operators.

The strengthening rupiah had injected a fresh mood into trading activities on the Jakarta Stock Exchange, with the composite index improving 0.21 percent to close at 513.95 points.

Turnover totaled 313.37 million shares worth Rp 379.86 billion (US$102.6 million).

Fadjar Limin Sutandi, head of research at Sigma Batara Securities, said the direction of stock trading activities was still dictated by the currency market.

"If the rupiah strengthens, stock trading will strengthen, and if the rupiah weakens, stock trading will weaken too," he said.

Stock analysts said they still could not assess how companies were performing because of the rupiah's continued volatility, but added that third-quarter corporate results should give clues to the impact of the currency crisis on balance sheets.

They said corporations would continue to enter the currency market to hedge their outstanding offshore debt, and this process would take time due to a large amount of such debt and a thin market.

Martin P.H. Panggabean, an economist from Lippo Securities, suggested that the government set up another offshore loan team to arrange private corporate debt.

"We currently have a team to monitor and arrange offshore loans for the government and/or state related projects, but not for private projects. In the long run, we need to create a new team to arrange private borrowing," he said.

This new team, he said, was necessary because the monetary crisis was partly prolonged by an excessive dollar demand from private companies with mounting offshore debt.

He said it was also important for the government to monitor and announce periodically the total amount of short-term debt of private companies in Indonesia to reduce speculation.

"What happens now is that everybody comes up with their own figures. This increases speculation among overseas players and weakens the rupiah," he said.

Currency dealers said the market was relatively calm yesterday following government assurance that it would maintain a free foreign exchange regime.

The market, they said, also anticipated a further move by the government, which the market expected to be announced today after a monthly cabinet meeting.

Minister/State Secretary Moerdiono said on Monday that the government would inform the people in coming days about measures to ensure the continuity of economic activities amid the currency crisis.

Dealers said the market also anticipated possible tightening of rupiah liquidity in the market following the central bank's intervention in the spot market.

They said the liquidity supply was sufficient yesterday, but increased demand from state banks was keeping overnight rates at a high level.

A balance of Rp 747 billion was available to the market from maturing central bank's short-term paper, SBIs. (aly/rid)

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