Rupiah gains, stocks lose ground
JAKARTA (JP): The Indonesian financial markets ended the week's trading mixed, with the rupiah continuing to make headway but the stock market losing steam.
Over the week, the rupiah gained 5.8 percent against the U.S. dollar, but local stock prices lost 3.9 percent to fall to their lowest level since 1993.
Currency dealers said the rupiah's charge to close the week trading at 10,850 against the dollar from the previous week's close of 11,200 was on the back of persistent dollar sales by state banks.
Friday's close was little changed from Thursday's close of 10,900.
State banks have led the rupiah's rise from below 13,000 in early August to its current level. Dealers believe state banks sold the dollar on behalf of the central bank, Bank Indonesia.
"We expect the rupiah will try to break the 10,500 resistance level next week because state banks will probably continue to sell the central bank's dollars for rupiah," a dealer with a private bank said.
In addition, the rupiah has been kept under control by the high interest rate policy which is tempting investors to hold on to the currency.
Rupiah trading Friday was especially thin because most operators were busy settling their ringgit positions following Malaysia's move to control trading of its currency, dealers said.
Banks have been given until Thursday to settle their ringgit obligations, and this is expected to leave rupiah trading in doldrums next week, they said.
Despite the rupiah's relative strength, stock prices on the Jakarta Stock Exchange (JSX) continued to slump over the week.
The Jakarta market indicator, the JSX Composite Index, closed the week at 325.55 points, 3.9 percent lower from the previous week's close of 339.02.
The index was 2.8 percent down on the previous day.
Friday's trading volume totaled 451.2 million shares changing hands valued at Rp 310 billion. Losers outnumbered gainers by 77 to 10, with 72 shares unchanged.
Profit taking, the regional bearishness after a drop on Wall Street Thursday and fears that Indonesia may follow Malaysia's lead by imposing capital account restrictions caused the fall in the local market, stockbrokers and analysts said.
Dealers said fears that foreign creditors may begin bankruptcy proceedings against some second-line listed companies because of their inability to pay their huge loans also spurred investors to sell their shares.
State-owned Bahana Securities' associate director and head of equity sales, Andre Cita, said what was happening in Indonesia was a combination of domestic malaise and global weaknesses.
He said Indonesia's equity market would not improve unless the government cut interest rates to normal levels and the global market rebounded.
"I think we have a period of a few weeks that is going to be very difficult. I'm hopeful that by the time we get into the last quarter, things will be a little clearer and we'll have something better to look forward to," Cita said.
Stockbrokers said investors sold blue-chip stocks across the board yesterday, triggering a market sell-off.
Market leader PT Telekomunikasi Indonesia (Telkom), which accounts for 17 percent of market capitalization, fell Rp 50 to Rp 2,100 on two million shares traded and tin producer PT Tambang Timah lost Rp 325 to end at Rp 4,400 on 130,500 shares traded.
Salim Group's food-arm, PT Indofood Sukses Makmur, was also down, Rp 100 at Rp 1,925 on 47.55 million shares traded after Japan's Nissin Food Products Co said it was not interested in buying a stake in the local food giant. (rid)