Rupiah ends higher on capital inflows

Rupiah ends higher on capital inflows

Dow Jones, Jakarta

The Indonesian rupiah ended higher on Friday on capital inflows in the local bond market as Bank Indonesia's rupiah support- policies gave some level of comfort to foreign investors, dealers said.

The dollar closed at Rp 10,215, down from Rp 10,360 on Thursday.

The rupiah-support measures that Bank Indonesia announced earlier this week include a 50-basis point hike in the benchmark BI rate to 10 percent, a ban on dollar-rupiah margin trading and tighter control on commercial banks' dollar-rupiah net open positions.

"Most dollar offers came from foreign names today," a dealer with a European bank in Jakarta said.

Dealers said London-based investors likely bought government bonds on the secondary market as prices have gone lower due to the current wave of redemption in mutual funds, sparked by rising local interest rates.

Some dealers said foreign market participants also sold dollars likely because they wanted to buy shares of the country's second largest lender, PT Bank Central Asia, later this month.

The government is expected to sell its remaining 5 percent stake in the bank by end-September, in a deal expected to raise around US$200 million.

Dealers expect the dollar to trade between Rp 10,100 and Rp 10,300 on Monday, with the market watching oil prices on the global market.

The market is also still waiting for further measures from the government on its fuel subsidy policy, dealers said.

Elsewhere, shares ended higher for the fourth consecutive session on Friday on further bargain-hunting as the rupiah continued to recover against the U.S. dollar, dealers said.

"The firmer rupiah has renewed expectations that the nation's economy this year will expand as targeted," said a trader with a local securities firm.

The government expects the economy to expand by 6 percent this year, compared with 5 percent in 2004.

Analysts said investors regained their confidence after the central bank early this week announced a package of monetary policies, which include moves to start increasing interest rates and plans to reduce fuel subsidies.

The Jakarta Stock Exchange Composite index advanced 1.7 percent, or 18.006 points, at 1098.456.

Gainers led decliners 77 to 39, with 60 stocks unchanged.

Volume rose to 2.2 billion shares valued at Rp 1.8 trillion, compared with two billion shares valued at Rp 1.8 trillion on Thursday.

Leading gainers, bellwether Telekomunikasi Indonesia (Telkom) jumped 4.6 percent to Rp 5,700 after its American depositary receipts in New York rose 5.1 percent and on expectations of solid nine-month earnings due to an increase in revenue from cellular services.

Automotive company Astra International rose 4.8 percent to Rp 10,900 on expectations that it will maintain solid 2005 car sales if the rupiah continues to strengthen.

Food company Indofood Sukses Makmur advanced 7.6 percent to Rp 850 on expectations that the company will soon name an underwriter for a plan to sell up to a 15 percent stake in flour mill unit Bogasari Flour Mills later this year.

On the downside, nickel miner International Nickel Indonesia, or Inco, dropped 3.2 percent to Rp 15,000, on profit-taking after gains over the previous four sessions due to expectations of solid 2005 earnings.

Dealers said they expect shares to continue to trade higher Monday, led by further buying in telecommunications blue chips.