Rupiah ends up on offshore investment inflows

Rupiah ends up on offshore investment inflows

Dow Jones, Jakarta

The rupiah ended slightly up on Friday on inflows of investment capital from overseas, dealers said.

The dollar closed at Rp 10,223 versus Rp 10,229 on Thursday.

Offshore investors poured dollars into the Indonesian currency market on Friday ahead of expected initial public offerings on the Jakarta Stock Exchange and after the sale of the government's 5 percent sale in PT Bank Central Asia (BCA) on Wednesday for US$215 million, traders said. Foreign investors bought the bulk of the bank's shares.

"I think basically the market fell off on the dollar, with players expecting money coming in for some IPOs and government investment projects," a dealer at a foreign bank said.

"There was also a lot of (dollar) selling from offshore and money from the BCA sale coming in."

But traders warned the rupiah's strength may be short-lived due to routine month-end dollar purchases by local corporate to service offshore debt obligations.

The rupiah may also come under pressure from the potential impact in the U.S. of Hurricane Rita, which is poised to hammer the Louisiana and Texas coasts.

"If the dollar strengthens due to less serious hurricane damage, the rupiah will likely slip (against the greenback) next week," a dealer said.

Dealers expect the dollar to trade between Rp 10,200 and Rp 10,300 on Monday.

Elsewhere, shares ended lower for the fourth consecutive session on Friday led by further selling in bank blue chips, amid expectations of poor 2005 earnings on high interest rates, dealers said.

Overall sentiment remains weak and cautious, with many investors staying on the sidelines, worried over a possible fall in U.S. markets later on Friday in the wake of Hurricane Rita.

On the domestic front, lingering concern over growing public resistance against fuel prices hikes early next month and the bird flu outbreak in the capital also added to negative sentiment.

"These negative factors continue to depress investors," said a trader with a foreign securities firm. He added that sporadic bargain hunting by local institutional funds helped the main index to stay above the important level of 1000.

The Jakarta Stock Exchange Composite index ended down 0.4 percent, or 3.907 points, at 1012.851.

Decliners led gainers 54 to 48, with 74 stocks unchanged.

Volume was one billion shares valued at Rp 1.1 trillion, compared with 2.1 billion shares valued at Rp 3.7 trillion Thursday. The higher trade volume on Thursday was due to the inclusion of a block sale of the government's 5.02 percent stake in BCA.

Dealers said investors continued to sell bank stocks on expectations of poor 2005 earnings on high interest rates and tax.

The high rate could reduce the banks' net interest margins and will push up credit costs for consumers, analysts said.

Indonesian banks -- which have been exempt from paying taxes since the 1997-1998 financial crisis -- have to pay 30 percent tax on their gross profits from the beginning of this year.

Dealers said they expect shares to trade slightly higher on Monday led by further bargain hunting in telecommunication blue chips.