Rupiah breaks 5,000 barrier against the U.S. greenback

JAKARTA (JP): The rupiah and the stock market plunged to new uncharted lows yesterday on regional weaknesses and news that President Soeharto would cancel his trip to Kuala Lumpur, dealers and stockbrokers said.

They said the cancellation of Soeharto's trip revived speculation about his health, forcing the rupiah to break the 5,000 barrier to a new record low of 5,225 against the U.S. dollar in the spot market.

Share prices on the Jakarta Stock Exchange fell 7.6 percent.

"After a two-day respite, concerns over President Soeharto's health again overwhelmed the market, which forced the rupiah to a very unrealistic level," said a state bank chief dealer.

"The rupiah was also dragged down by regional weaknesses which were driven by the falling South Korean won," added a local private bank dealer.

The rupiah's plight was made worse by poor dollar liquidity, allowing players to push it down sharply with transactions as small as US$1 million.

The rupiah, which opened at 4,640/80 to the dollar, crossed the 5,000 barrier to a record low of 5,150 immediately after Minister/State Secretary Moerdiono announced the cancellation of Soeharto's trip, dealers said.

They said the rupiah was knocked down further in the afternoon to another low of 5,225 after the London market opened.

The rupiah closed at 5,120/5,220 on the Jakarta market.

The state bank chief dealer said Singaporean players intentionally pushed the rupiah down yesterday as most domestic players stayed on the sidelines.

"I think they used the Soeharto issue to further press down the rupiah. Well, let them play, make gains and take the losses. We better take to the sidelines in this situation. It's useless to confront them," the dealer said.

Dealers said Bank Indonesia was not seen intervening in the spot market yesterday, which they described as a tactical move to let the market absorb the losses.

They said trading volume was extremely light yesterday, with operators easily sending the rupiah down sharply with only one million dollars.

Dealers said sentiment over the rupiah remained weak, with the outlook seen as gloomy as the financial disaster in South Korea intensified.

The panic in the currency market spread to the Jakarta Stock Exchange, which saw its composite index tumble 30.26 points to a four-year low of 365.85.

Trading turnover totaled 649.83 million shares worth Rp 557.83 billion ($109.4 million).

Stock brokers said the cancellation of Soeharto's trip to Kuala Lumpur created a very negative sentiment in the stock market, already susceptible to negative rumors.

"All foreign investors dumped their local stocks when the rupiah sank to another new low yesterday after Moerdiono announced that the President would cancel his trip to Kuala Lumpur," a local securities house head of sales said.

"All people are desperate now," he said.

The head of research at Sigma Batara Securities, Fadjar Limin Sutandi, said concern over the President's health, coupled with weak regional markets, had forced local investors to follow foreign investors in abandoning their stock investments.

"When foreign investors make a major sell-off, local investors follow them because they lose confidence in the local stock market," he said.

Fadjar predicted that the main price index would likely fall further, probably to the 350 level as the new year approached.

"I think we will not be so surprised to see the index fall to 350 by the end of this year," he said, adding that some foreign fund managers and investors had started to take their annual holiday leave.

Share prices dropped almost across the board yesterday.

State-run domestic telecommunications firm Telkom closed Rp 275 weaker at Rp 2,500, while international telecommunications operator Indosat climbed Rp 25 rupiah to Rp 9,050.

Cigarette producing giant Gudang Garam slipped Rp 600 to Rp 4,000, and competitor Sampoerna fell Rp 600 to Rp 4,000.

Bank International Indonesia slipped Rp 75 to Rp 350, Bank Negara Indonesia fell Rp 75 to Rp 475 and Bank Dagang Nasional Indonesia dropped Rp 50 to Rp 350. (aly/rid)

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