Rupiah extends gains as stocks continue to fall

JAKARTA (JP): The Indonesian rupiah extended gains yesterday amid optimism about the country's efforts to clean up its banks, while local stock prices continued to fall, tracking a regional weakness.

Currency dealers said that unlike in recent months, the foreign exchange market was no longer jittery in the face of rumors or even threats of unrest, such as that posed by the current Indonesian Democratic Party (PDI) congress in Palu.

"The fate of the rupiah currently rests with the market principle of supply and demand. The market is bullish on the rupiah on expectation of more official funds flowing into the country," a dealer with a local private bank said.

The rupiah rose to 11,000 against the U.S. dollar in morning trade before closing at 11,175, much stronger than Monday's close of 11,650.

Dealers said the government move last weekend to suspend the operations of three sick banks and take over the shareholdings of four others had gained market support.

In addition, the market was also pleased with the Armed Forces' move to discharge former president Soeharto's son-in-law Lt. Gen. Prabowo Subianto to punish him for his role in the abduction and torture of political activists.

"Those moves prove that the government and the military are serious in their efforts to regain market confidence," the dealer said.

However, the local stock market continued to suffer from regional bearishness, record high banking deposit rates and arbitrage selling on dual-listed stocks yesterday.

The Jakarta Stock Exchange Composite Index fell 3.402 points to close at 367.143 with a turnover of 247.25 million shares worth Rp 310.43 billion.

Edwin Syahruzad, a stock analyst at Pentasena Securities, said both the short-term and long-term outlooks for the local market remained gloomy because high interest rates appeared set to remain in place for a long time.

He said that many local and foreign investors had moved their funds from the equity market to one-month Bank Indonesia (BI) promissory notes (SBIs) which offer rates of 70 percent per annum.

"SBIs have attracted the attention of investors because they carry no risk," Edwin said.

A broker with Trimegah Securindo Lestari said that trading activities remained sluggish because foreign investors had not yet returned to the battered local market in any strength.

In addition, he said they were greatly concerned over revisions to the government's plan to privatize state enterprises.

The broker said that although stock prices for some state companies were relatively cheap, foreign investors were not interested because they feared the government might backtrack yet again.

Shares in heavyweight state telephone company PT Telkom slid Rp 25 to Rp 2,775 with 14.58 million shares traded and shares in the state international call operator PT Indosat dropped Rp 475 to Rp 8,925 on 460,500 shares traded.

State tin mining company PT Tambang Timah shares fell Rp 250 to Rp 6,025 on 736,500 shares traded, but state cement manufacturer PT Semen Gresik gained Rp 1,050 to Rp 7,100 on 3.71 million shares traded.

Shares in cigarette giant PT Gudang Garam slid Rp 25 to Rp 8,400 on 841,000 shares traded, while shares in competitor PT HM Sampoerna rose Rp 50 to Rp 2,425 on 7.9 million shares traded. (aly/rid)