Rupiah falls on reports of unrest and massive rally
JAKARTA (JP): The rupiah nose-dived on Tuesday on reports of unrest and student demonstrators demanding President B.J. Habibie resign.
The volatile currency, which opened weaker at 11,500 against the U.S. dollar, closed at 12,100/12,250 in the Jakarta spot market Tuesday, 11.5 percent lower than Monday's close at 10,850.
Dealers attributed the rupiah's drastic fall, after gathering momentum against the American dollar over the past few weeks, to growing fears of unrest in several towns outside Jakarta escalating to major population centers.
They said the demonstration staged by students at the House of Representatives building on Monday worsened market sentiment.
The security officers reportedly used tear gas early on Tuesday to disperse a gathering of hundreds of university students protesting at the compound.
"Investors were scared to see the student demonstration, the largest rally since May, after several weeks of calm," a chief dealer with a local private bank said.
The students demanded that Habibie step down from the presidency as he had failed to lead the country out of its dire economic state.
Newspapers also reported on Tuesday social unrest in Central Java. Angry mobs, according to the reports, burned and damaged at least 20 shops owned by ethnic Chinese in Kebumen on Monday.
The dealers said the reports of rioting had incited foreign investors especially from Singapore, to cash in their rupiah for dollars.
"Bulk dollar-buying orders from Singapore ate up the dollar- selling by state banks at home," the dealer said, pointing out that state banks, which sold US$20 million in the market, failed to improve the rupiah's stand against the greenback.
Stock market
Bearish sentiment on the rupiah extended to the stock market with stock prices on the Jakarta Stock Exchange (JSX) falling 1.6 percent Tuesday on the back of market fears of a tense political situation at home and profit-taking in some stocks that had rallied in the previous days.
"But the general tone is that most investors fear another biggest student rally in the coming days," the head of institutional sales at Mashill Jaya Securities, Antonio Yongnata, said.
The JSX Composite index fell 5.39 points to 330.41 on a total turnover of 190.52 million shares valued at Rp 280.28 billion (US$25.48 million).
Losers outnumbered gainers 45 to 27 with 78 stocks unchanged.
Antonio said that the country's rattled financial market, which is currently struggling to lure foreign fund managers to it, was predicted to decline further because of the political uncertainty at home.
Stockbrokers said that most foreign investors, who had long moved to the sidelines of the local hammered market, continued to shun the bourse.
"The sentiment is so bad that our battered market is going down into another gloomy situation," an analyst with Trimegah Securindo Lestari said.
Brokers said it was only the rise of international call operator PT Indosat, which rose Rp 425 to Rp 8,000 on 93,500 shares, that prevented the main index from falling further.
Trading on the local market was marked by the suspension of trading in poultry producer PT Cipendawa Farm Enterprises and Bank Arya Panduarta after it emerged the former had closed its operations on August 1 and the latter experienced a significant increase in share price.
Cipendawa, which is 36 percent owned by Probosutedjo, the half brother of former president Soeharto, was allegedly in massive financial difficulties due to the crisis, stock analysts said. (aly)