Rupiah closes 4% higher while stocks gain 1.3 percent

JAKARTA (JP): The country's financial market gained footing on Wednesday with the rupiah advancing 4 percent to close at 8,450 against the U.S. dollar and stock prices rising 1.3 percent.

Currency dealers attributed the strong rupiah to the rise of the Japanese yen against the American dollar and a relatively stable social climate in the country.

"I think a strong yen was the main reason behind the rise of the rupiah," a dealer with a local private bank said.

The Japanese yen was traded at 112.15 against the American dollar on Wednesday, firmer than its Asian close at 115.02 the previous day.

Currency dealers said the rupiah, which opened at 8,675/8,750, continued to advance against the American dollar following the central bank's move to intervene in the market through state banks.

State banks were seen selling dollars at 8,675 and 8,600 levels, which shocked offshore operators who had built up long dollar positions.

"Offshore operators did not expect the rupiah to break the 8,600 level as they were caught long off dollars. This triggered cut-loss moves among offshore operators after the rupiah broke through the 8,600 level," said Chris V. Koemolontang, a chief dealer with a joint venture bank in Jakarta.

He added that the rise of the average rate of Bank Indonesia's one month promissory notes (SBI) to 36.97 percent in the weekly auction on Wednesday from 36.53 percent last week had also provided a strong boost for the rupiah.

"Such an increasing interest rate will make the rupiah look more attractive for foreign investors," Chris added.

In addition, dealers said Indonesia's huge trade surplus of over US$20 billion for the first months of this year -- resulting from lower imports -- also gave an additional boost to the currency.

Nevertheless, dealers warned that the strengthening of the rupiah was still fragile as the country's social and political tension is poised to heighten.

Taking the lead of the rupiah, share prices on the Jakarta Stock Exchange (JSX) rose 1.3 percent, with the JSX Composite Index ascending 5.39 points to close at 410.55.

Trading turnover totaled 279.77 million shares, valued at Rp 300.77 billion.

Gainers led losers 50 to 37 with 85 stocks remaining unchanged.

Stockbrokers and analysts said the absence of antigovernment demonstrations and the rise of the international call operator PT Indosat's share price following its better-than-expected profits had provided a buying impetus for investors in the local bourse.

"I think a strong rupiah and the rise of the Indosat was the main reason for the rise in the local stock market," Antonio Yongnata, an institutional sales manager at Mashill Jaya Securities, said.

Indosat's share price rose Rp 525 to Rp 11,725 with a total of 3.85 million shares changing hands.

Indosat announced Wednesday that its net profit soared to Rp 1.16 trillion in 1998 compared to Rp 640.8 billion in 1997, and its total revenue rose by 44 percent to Rp 2.10 trillion in 1998 from Rp 1.45 trillion the year before.

Stock brokers said that the buying mood in Indosat had forced domestic investors to start picking up other blue chip stocks which had been under selling pressure, like cigarette makers PT Gudang Garam and PT HM Sampoerna, as well as mining firm PT Aneka Tambang.

Gudang Garam's share price rose by Rp 600 to Rp 11,500 on 1 million shares traded, HM Sampoerna was also up by Rp 150 to Rp 5,950 on 702,500 shares and Aneka Tambang was up by Rp 50 to Rp 1,525 on 9.54 million shares moved.

Stock brokers said that Wednesday's movement of the share prices in the local battered market, unlike in previous days, was not dictated by the regional equity markets.

"It is surprising that while other regional equity markets were mostly down, our market is on the upward trend," Imelda Kwan, an institutional sales broker with Trimegah Securindolestari, said.

But most stock brokers said fears over social unrest approaching the general election in June could undermine the short-lived bullish sentiment in the local market.

"People are still in the dark about the medium and long term prospect of our market," Mashill's Antonio said. (aly)