Rupiah and stocks surge ahead of CGI meeting

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)