Rupiah gains ground but stocks keep on falling

JAKARTA (JP): The rupiah gained ground closing firmer on Wednesday at 8,650 against the U.S. dollar despite a fall in the Japanese yen and other regional currencies.

Currency dealers said that the rupiah, which was traded in moderate volume, moved in an isolated upward trend as massive intervention by the central bank kept the rupiah afloat.

"Massive dollar offerings by state banks bolstered sentiment on the rupiah," a chief dealer with a joint venture bank said.

Dealers said that the rupiah, which opened at 8,700, managed to hit an intraday high of 8,525 due to dollar unloading by several state banks and offshore operators, especially from Hong Kong, who feared that Indonesia could soon adopt a currency board system (CBS).

"Market fear that Indonesia will adopt the CBS is forcing some market operators to sell their dollars," the dealer said.

Prominent economists, Johns Hopkins professor Steve Hanke, Merton Miller of the University of Chicago and Christopher Culp, director of Risk Management Services have called again on the Indonesian government to try a currency board system to rebuild the country's devastated economy.

Those fears abated in late trading but forced the rupiah to end slightly lower at 8,650 as domestic corporate demand for the dollar remained high to service offshore obligations.

"Though the rupiah seemed to gain ground, uncertainties remain very high and the rupiah's strong stance doesn't suggest a recovery of confidence," another chief dealer said.

Dealers said that the rupiah remained bearish with the trading band expected to remain between 8,500 and 9,000 in the coming days.

Unlike the rupiah, share prices on the local stock market edged down slightly on Wednesday with the Jakarta Stock Exchange (JSX) composite price index losing one percent to 398.68 points on total turnover of 137.09 million shares valued at Rp 141.91 billion changing hands.

Decliners led advancers 49 to 33 with 78 stocks remaining unchanged.

Stock brokers attributed the fall in the local stock market to a general fall in the other regional equity markets led by a 1.7 percent fall on Wall Street and profit taking on blue chip stocks that gained ground the previous day.

"The fall on Wall Street forced us not to expect too much on Wednesday," Vonny Juwono, an institutional sales broker with Trimegah Securindolestari said.

Adding to the general fall in the regional market was lively profit taking in most blue chip stocks. Investors quickly realized their gains had also increased the pressures on share prices on the local market.

"Trading activities have been based on short-term speculative strategies ... people will just go in and out to make profits," Fitri Murniati, a stock analyst with BNI Securities said.

Stock brokers said that foreign investors, who had placed funds on certain big-capitalized stocks in previous days had discarded their portfolio holdings to speedily cash in their gains before losing their investment here.

Several joint venture brokerage firms such as ING Barings, Asia Equity, Credit Lyonnais, Merrill Lynch Indonesia and Jardine Fleming Nusantara were net sellers on Wednesday.

Share prices of blue chip stocks such as international call operator PT Indosat slid Rp 500 to Rp 12,000 on 1.2 million shares traded, as investors pulled out fearing investment losses.

Indosat was reported to have invested Rp 106 billion in Canada's AlphaNet Telecommunications Corp. which filed for bankruptcy earlier this week. The company set aside Rp 29 billion in anticipation of the loss last year. (aly)