Rupiah dives further after Brazil scare

Rupiah dives further after Brazil scare

JAKARTA (JP): The country's crippled rupiah tumbled again on
Friday to hit an intraday low of 9,300 against the U.S. dollar as
stock prices plunged 1.5 percent for the third consecutive day.

Financial analysts said fears of a global financial crisis
following Brazil's devaluation of the real on Wednesday had put a
damper on trading in most emerging markets, including Indonesia's
which is currently struggling to shake off its worst-ever
financial crisis in three decades.

"The main concern for our financial market is still Brazil," a
senior dealer with a joint venture bank here said.

The rupiah, which opened at 8,800/8,900, quickly broke through
the 9,000 level in morning trading to bottom at 9,300 against the
American dollar, its lowest level since November 5.

Persistent attacks from offshore, led by Singapore and Hong
Kong operators, continued to weigh down the local unit.

The rupiah managed to claw back to below the 9,000 level to
end its Friday trading at 8,975 after certain state-owned banks
unloaded dollar reserves to support the rupiah. Friday's close
was 3.5 percent lower than Thursday's close of 8,675.

"The rupiah managed to recover as some offshore players, who
bought the dollar at 8,700 the previous week, cashed in their
profits when it hit 9,300 on Friday," another dealer said.

"I think some people used Brazil's currency devaluation as a
scapegoat to attack the rupiah to gain profits," he added.

The rupiah surged to around 7,800 to the dollar early last
week after the government announced its 1999/2000 state budget.

Some traders, however, said the central bank did not sell off
large amounts of dollars through state banks on Friday, as it has
done in recent weeks, by converting its International Monetary
Fund-brokered dollar loans into rupiah.

One analyst said he suspected the central bank running out of
dollars, and in no position to fight the fierce market, which was
aggressive in pulling down the rupiah.

"We do not know exactly what the reason was, but even if Bank
Indonesia converted its dollars to rupiah, this would have been
consumed by the huge demand for dollars," the analyst said.

Bank Indonesia Governor Sjahril Sabirin and the Coordinating
Minister for Economy, Finance and Industry, Ginandjar
Kartasasmita, said that the currency woes in Brazil, which rocked
the global financial markets, also led to the fall of the rupiah.

"We remain alert on (this matter)," Ginandjar said.

The rupiah's drop battered share prices in the Jakarta Stock
Exchange (JSX), with the main price gauge -- the JSX Composite
Index -- shedding 1.5 percent to close at 402.40 points -- up
from the day's low at 397.89.

A total of 291.40 million shares valued at Rp 699.70 billion
changed hands.

Decliners outdistanced advancers 61 to 23 with 82 stocks
remaining unchanged.

Stockbrokers and analysts said that persistent massive
sell-offs ahead of the Moslem Idul Fitri holiday had forced most
investors to discard all their portfolio holdings.

"Investors think that there is no use holding stocks during
the holiday," Suhendra, an institutional sales broker with
Trimegah Securindolestari, said.

Stockbrokers said that trading activity subsided on Friday as
some traders and local investors had already left town for the
holiday.

The head of research at Mashill Jaya Securities, Edhi S.
Widjojo, said the sentiment in the battered local exchange had
not improved, with most investors still anxious about the
country's political and economic mess.

"Investors are still scared to reenter our market," he said,
pointing out that most people did not see any reason to invest
during this period of turmoil. (aly)