Rupiah gains ground as stock prices fall further

Rupiah gains ground as stock prices fall further

JAKARTA (JP): The rupiah extended its gains on Tuesday,
closing firmer at 8,825 against the U.S. dollar in very thin
trading as the stock market continued its slide, falling nearly 1
percent.

Dealers said the rupiah opened at 8,825 and shot up to an
intraday high of 8,775 in morning trading as certain offshore
operators, particularly those from Singapore, sold their dollars
for the rupiah.

However, persistent dollar bids by domestic commercial banks,
apparently to either service their foreign debt obligations or to
finance the importation of raw materials for their customers,
capped any further advances by the rupiah against the dollar.

"Domestic dollar demands provided no more leeway for the
rupiah to gain ground," a chief dealer with a joint venture bank
said.

The rupiah closed the day's trading at 8,825, slightly
stronger than the previous day's close of 8,900.

The governor of Bank Indonesia, Sjahril Sabirin, attributed
the strengthening rupiah to the passage of political bills by the
House of Representatives last week meant to pave the way for the
general election in June.

Speaking to journalists before meeting with President B.J.
Habibie on Tuesday, Sjahril also said that the government's
clearer position on the bank recapitalization program provided
support for the rupiah.

Sjahril also stated that the central bank was ready to defend
the currency if it came under renewed attack by speculators.

Nevertheless, dealers warned that unresolved problems on the
country's political and economic fronts, especially ahead of the
general election in June, would further dampen the rupiah's
already grim outlook against the American dollar.

A dealer with a local bank said the rupiah's thin trading
volume, which stood below US$100 million on Tuesday, reflected
the reluctance of offshore operators to enter the country's
currency market.

"I suspect the rupiah will return to the 9,000 level and may
weaken further, especially toward the end of this budget year in
March," he said, pointing to the fact that the government had not
yet secured the funding to plug the budget deficit in the coming
fiscal year.

Unlike the rupiah, share prices on the Jakarta Stock Exchange
(JSX) fell nearly one percent, with the JSX Composite Index
falling 3.94 points to close at 405.16 on a total turnover of
162.33 million shares valued at Rp 183.77 billion.

Losers easily outdistanced gainers 41 to 31 with 85 stocks
unchanged.

Stockbrokers attributed the second consecutive day of
declining share prices to the absence of any fresh leads from the
domestic market coupled with a general plunge in regional equity
markets.

"Trading activities remained quiet for the whole day because
most investors were reluctant to establish new positions," Vonny
Juwono, an institutional sales broker with Trimegah
Securindolestari, said.

Profit taking on certain blue chip stocks also weighed down
market sentiment in the country's ravaged bourse, she added.

The head of sales at Bahana Securities, Andre Cita, said that
lingering worries over social and security problems following
deadly communal clashes in Ambon, Maluku, had discouraged foreign
investors from entering the Indonesian market.

"Foreign investors view Indonesia as less competitive than any
of the neighboring countries right now," he said, pointing out
that groundless rumors of social unrest spreading to major cities
across the country had kept market sentiment bearish.

Trimegah's Vonny said that the drastic fall of the daily
average trading turnover to only Rp 100 billion on Tuesday from
an average of Rp 400 billion several months ago indicated the
loss of confidence by foreign investors in the country's stock
market.

"And we still do not know if the country's crisis has bottomed
out," she added. (aly)