Rupiah falls to 5,800, stocks drops 7.2 percent
Rupiah falls to 5,800, stocks drops 7.2 percent
JAKARTA (JP): The rupiah and local stock prices continued
their uncontrolled free falls yesterday due to weak regional
currencies and lingering unfounded rumors, dealers and
stockbrokers said.
The rupiah, which opened at 4,900/5,100 against the U.S.
dollar in the spot market, fell almost 16 percent to a record low
of 5,800 against the U.S. dollar and closed at 5,600/5,900.
Stock prices on the Jakarta Stock Exchange lost 7.2 percent,
with the composite index closing down 26.317 points at 339.536.
Clear signals that President Soeharto had begun to gradually
return to work yesterday after rest on medical advice failed to
impress the currency market, dealers said.
"People are really losing confidence in the rupiah as they
continue to buy dollars at the current rate, which is believed to
be too expensive," a local bank dealer said.
He said the market was still swamped with unfounded rumors,
mostly coming from Singapore.
"We, the players, do not believe the rumors anymore, but
common people, our customers, are still susceptible to such
rumors," he added.
Currency dealers said most local players still stayed on the
sidelines, giving more room for foreign players to knock down the
rupiah even with only US$1 million.
Increased volatility and nervous trading had widened trading
spreads to 200 and 300 rupiah, leading to extremely thin market
transactions.
"The market was really thin. Most local players don't want to
open up a new position toward the year's end for fear of being
attacked at any time," said another local private bank dealer.
Local players entered the market only to meet customers'
demand. Otherwise, they would keep their position squared, he
said.
Hashim Djojohadikusumo, founder and chairman of the Tirtamas
Group, predicted yesterday that if the rupiah continued to weaken
or stay at the current level, it would cause many local firms to
go under.
An analyst with a joint-venture securities firm shared
Hashim's prediction, saying that the financial crunch which had
worsened over the past few weeks would eventually push more
companies toward bankruptcy.
"With the persistent fall of the rupiah, companies with
unhedged foreign debt will likely go bankrupt," the analyst said.
The rupiah has lost 60 percent of its value against the U.S.
dollar since early this year.
Hashim said the rupiah's drastic depreciation was now driven
more by sociopolitical psychology than fundamentals.
"The rupiah's depreciation is really crazy. This has become a
political problem, and we need a political solution to this
problem," he said.
The weakening rupiah sent a negative sentiment to stock
trading on the Jakarta Stock Exchange, which saw a 7.2 percent
drop in its composite index.
Trading turnover totaled 524.78 million shares valued at Rp
407.18 billion ($71.4 million).
BZW Niaga Securities' head of sales, Adnan Tan, said a
combination of the persistent fall of the rupiah and various
rumors swamping the market had prevented most investors from
entering the market.
"It's hard to determine the bottom of the market. Most people
don't know what to do," he said.
He said economic and political insecurity had posed increasing
uncertainty for most local and international investors in the
local stock and financial markets.
"Economic insecurity means that investors are greatly
concerned with the President's health and the leadership of this
country," he said.
Tan said investors did not know if the market had reached its
bottomed-out level or not.
"The real impact of the monetary crisis is not known yet. We
still have to wait for a worse impact in the coming months," Tan
said.
A dealer with a local securities firm said that only certainty
about presidential succession would calm the market.
"The drastic fall of the financial and stock markets is one
reflection of this uncertainty," the dealer said. (aly/rid)
Currencies -- Page 11