Rupiah and stocks surge ahead of CGI meeting

JAKARTA (JP): The rupiah strengthened again yesterday on fresh hopes that the Indonesian donors' meeting in Paris this week will bring in more foreign aid to revive the country's battered economy.

The rupiah's continued improvement toward Rp 13,500 per U.S. dollar had a positive impact on the local stock market, with the main price index rising in moderate trading.

Currency dealers said the rupiah managed to improve against the greenback because investors took positions ahead of the meeting of the Consultative Group on Indonesia (CGI), a consortium of international lenders chaired by the World Bank, which starts today.

"People are expecting positive news from the CGI meeting," a chief dealer with a local private bank said.

He said the market expected the CGI meeting would provide more funds to help Indonesia improve its crippled economy.

"There is strong market expectation that this year the CGI's aid commitment will be higher than that of last year," a chief dealer with a local private bank said.

Analysts said countries in the CGI group are expected to provide more than the $5.3 billion they pledged last year.

Hopes of a positive outcome from the CGI meeting propelled the rupiah higher against the American dollar to close at 13,650/13,750 yesterday, slightly firmer than its close at 13,800/13,900 the previous day.

The rupiah's rise is expected to be sustained in the short term and thus it is likely to test the 13,500 level against the American dollar soon.

"There is a chance that the rupiah will break the 13,500 level in the next few days but it will not be able to break the 13,000 level," the dealer said.

Currency dealers said that uncertainty over the country's political climate, clouded by rising concerns over security problems at home, would keep the brakes on the rupiah's bullish sentiment.

"The bullish sentiment on the rupiah will be temporary as overriding concerns over the social and political problems will kill it," the dealer said.

Prices on the Jakarta Stock Exchange (JSX) firmed slightly yesterday with the main composite price closing 0.50 points higher at 483.53 points on a total turnover of 353 million shares changing hands valued at Rp 365 billion (US$26.5 million).

Gainers outpaced losers 61 to 38 with 97 stocks closing unchanged while 92 were untraded.

Brokers said that although stock prices rose, trading activities on the local bourse remained slow with speculative buying dominating activities.

"The market was volatile because there was some profit taking in midday trading before speculative buying at the end of the trading day," a dealer with Mashill Jaya Securities said.

Associate director and head of equity sales of Bahana Securities, Andre Cita, said that uncertainty over the country's economy, which posed a big problem for most offshore institutional investors, was causing most investors to stay to the sidelines.

"Besides, some investors are still on their vacation," he said citing investors from the U.S. and the European countries who are on holiday in July and August.

Cita said that even though the government had made some progress in improving the country's battered economy, foreign investors were not yet tempted to put their funds in Indonesia as long as security and social problems remained unresolved.

The head of research at Mashill Jaya Securities, Eddhy Widjoyo, said the upbeat sentiment on the CGI meeting would not last long as most trading activities were based significantly on speculative factors.

"There are no long-term investors in the local market as most trading is based on speculative orders rather than fundamentals," he said.

Second-line oil producer PT Medco Energy Corp. rose Rp 500 to Rp 3,450 on 2.6 million shares traded yesterday

Brokers said the buying was spurred by speculation that the company would soon make a stock split and expectations that it will record higher-than-expected earnings for the first half of the year.

Also on the second board, shipping company PT Berlian Laju Tanker rose Rp 175 to Rp 2,300 on 1.8 million shares traded.

"The rise in the companies' share prices is based on speculation," Mashill's Eddhy said. (aly)