Rupiah falls again but stock prices gain ground

JAKARTA (JP): The rupiah remained weak against the U.S. dollar yesterday, but Jakarta share prices increased slightly in a technical rebound, analysts said.

Foreign exchange dealers said the further weakening of the rupiah was triggered by falls in the Singapore dollar and Malaysian ringgit.

They said spot rupiah, which opened at 2,610/2,620 against the dollar, was knocked down to 2,655 by midday before it stabilized in the afternoon and closed at 2,640/2,643.

Share prices on the Jakarta Stock Exchange rose 0.7 percent, with composite index closing 4.77 points firmer to 662.94 yesterday.

Total turnover was 296.01 million shares worth Rp 503.85 billion (US$194.53 million) changing hand on the regular market yesterday.

Securities analysts said yesterday's rise in stock prices was just a technical bounce after a sharp plunge in the past few days.

"I think it is just a technical rebound after the market saw a sharp plunge since early August," an analyst said.

Trimegah Securities' head of research, David Chang, said a wave to pick up big-capitalized stocks, including PT Telkom, helped activate market sentiment yesterday.

"Investors are starting to pick up good quality stocks which are already cheap in the market," Chang said.

He said share prices on the Jakarta Stock Exchange were the cheapest in the region.

But he warned that regional currency volatility and the weakening rupiah would remain a big concern for investors.

"I think most investors are still worried about the prospect of rupiah and other regional currencies," Chang said.

Foreign investors would not enter the market until they saw a clear direction for the rupiah, a dealer said.

"While the rupiah is not stabilized, the stock market will not change much in the coming months," he said.

One foreign exchange bank's chief dealer said the weakening of the rupiah was due to a drastic drop in the Singapore dollar, which fell through the psychological 1.50 to the U.S. dollar level to hit a new three-year low of 1.5085.

This followed comments by a Monetary Authority of Singapore official that the Singapore dollar's level was appropriate to what was happening in the market.

"I hope no one in Indonesia's monetary authority will comment on the rupiah this time because it will just worsen the situation," the chief dealer said.

Dealers said Bank Indonesia, the central bank, was not seen intervening in the market although the rupiah fell off the range the central bank had said it was comfortable with, between 2,550 and 2,610.

A dealer with another foreign exchange bank said the rupiah would continue to weaken because many local investors exposed to dollar debts had an open position on the dollar.

"They want to hedge their position at 2,550 level. But I would say it is impossible to reach that level given the current situation," he said.

The central bank kept its rates of bilateral central bank certificates (SBI) unchanged and continued to be absent from the short-term securities (SBPUs) market.

Dealers said artificially high central bank short-term rates were likely to continue as the foreign exchange market remained volatile.

The central bank kept its intervention band at 2,378/2,682 but raised the conversion band to 2,616/2,664 yesterday from 2,588/2,636 Monday. (aly/rid)