Rupiah gains strength as Habibie's prospects dim

JAKARTA (JP): The rupiah increased slightly against the U.S. dollar in thin trading on Friday due to lessening concern that B.J. Habibie would remain president.

Analysts said that growing speculation that the People's Consultative Assembly (MPR) would reject Habibie's accountability speech helped prevent the rupiah from falling further.

"The rejection of Habibie's accountability speech will have no political consequences for the President. But it will certainly lessen his chance to be elected," a noted analyst said.

The rupiah, after trading in a range of 7,950 and 8,200 to the U.S. dollar, finally closed at 8,050 on Friday, slightly higher than 8,150 on Thursday.

Currency dealers said trading was generally thin as most money market players took a wait-and-see attitude.

"Most investors took to the sidelines of the market until the new president is elected next week," one dealer said.

Bank Indonesia Governor Sjahril Sabirin said he believed the rupiah should strengthen to between Rp 6,000 and Rp 7,000 to the dollar after next week's presidential election, even if Habibie beats the odds and is elected.

He said the rupiah would return to a "realistic level" after the date because the election of a new president would bring stability, whichever candidate ultimately takes office.

Many analysts in Jakarta take a negative view of the possible election of Habibie to the presidency, in particular because of a rising tide of street protests against his government.

Thousands of students took to the streets on Friday to demand MPR members not to reelect Habibie. Some of the protesters set passing vehicles in the Central Business District on fire while others stopped cars in search of military and police personnel.

Shares in the Jakarta Stock Exchange (JSX) also traded in very thin volume and slow pace as most investors went on the sidelines to await the election of the new president on Wednesday.

Hovering within negative territory almost the whole day, the JSX finally closed about one-fifth point higher following highly suspected government market intervention and the last-minute speculative local buying.

The local exchange index closed almost unchanged to end the week at 567.91 points, with 287 million shares changing hands at a total value of Rp 294 billion.

The index lost 20.3 points or 3.4 percent during the week.

"The public's negative reaction and the content of the speech itself have sent the market to a noticeable wait and see," said Budi Ruseno, an analyst from PT Bhakti Investama.

Budi said that he noticed the index went up unexpectedly during late trading.

"The index surged at the very end of the day's session. This, of course, raised suspicion of intervention," he said.

He said the slow-moving index finally was able to close higher after it reached more than minus seven points in the morning session.

He said that he saw a noticeable surge in the price of big cap stocks in very late trading.

"Cigarette maker PT Gudang Garam which was at Rp 17,950 in the morning somehow closed the day's trading at Rp 18,400," he said.

Its competitor H.M. Sampoerna, which fell as low as Rp 15,525 in the morning, maintained to close at Rp 15,700. State-owned telecommunications company PT Telkom was at Rp 2,975 in the early trading but closed at Rp 3,025, Budi said.

Other big cap shares experiencing similar fluctuations were giant automaker PT Astra International, pulp and paper manufacturer PT Indah Kiat and PT Tjiwi Kimia.

Another analyst said there was also late buying of cheap shares by local investors on speculation the MPR would reject Habibie's speech on Saturday, triggering a rally in the market. (udi)