Rupiah higher as capital inflows go on

Rupiah higher as capital inflows go on

Dow Jones, Jakarta

The rupiah recovered further on Monday to a four-week high as
foreign investors continued to buy local stocks and bonds,
dealers said.

The dollar closed at Rp 10,095 versus its close on Friday at
Rp 10,215.

"Capital inflows to the stock and bond markets continued
today, but I'm not sure how long this will last," a dealer with a
foreign bank said.

He also said significant capital inflows would continue only
if the government cuts fuel subsidies by increasing domestic fuel
prices to help the state budget.

State Secretary Yusril Ihza Mahendra on Monday quoted
President Susilo Bambang Yudhoyono as saying a fuel price hike
will be likely in early October. But Yusril said the government
has not decided on the magnitude of the increase.

Cutting fuel subsidies is one of the government's fiscal
policies to help the slumping rupiah.

The government's plans to help the rupiah, along with Bank
Indonesia's rate hikes twice this month, helped restore foreign
investors' confidence.

Short-term government bond prices also recovered, dealers
said. The price of government bonds maturing in 2007 rose to 92.5
from 91 on Friday, a dealer said.

Dealers expect that the dollar could continue to head lower,
toward Rp 10,000 on Tuesday, with upside resistance at Rp 10,200.

Elsewhere, shares ended higher on Monday on growing
expectations that the rupiah will continue to recover after the
central bank hiked its key interest rate earlier this month,
dealers said.

The stronger rupiah could ease debt service costs of many
Indonesian companies, paving the way for more business expansion,
analysts said.

"The firmer the rupiah, the better sentiment in the equity
market will be," said a trader with Paramitra Securities.

Analysts said investors regained their confidence after the
central bank last week raised the main interest rate to 10
percent from 9.5 percent.

The Jakarta Stock Exchange Composite index advanced 0.7
percent, or 7.201 points, to 1105.657. The main index has risen
6.4 percent in the previous six sessions after the interest rate
hike.

Gainers led decliners 82 to 37, with 58 stocks unchanged.

Volume, however, fell to 1.33 billion shares valued at Rp 1.6
trillion, compared with 2.2 billion shares valued at Rp 1.8
trillion on Friday.

The stronger rupiah has renewed expectations that purchasing
power will remain stable for the rest of the year, spurring
bargain hunters to buy back consumer blue chips.

Automotive company Astra International rose 2.3 percent to Rp
11,150 and food producer Indofood advanced 5 percent to Rp 890.

Bank Mandiri, the nation's largest lender by assets, ended up
5.2 percent at Rp 1,410 on renewed hopes that the firmer rupiah
will inspire the central bank to stop increasing interest rates.

Retailer Hero Supermarket jumped 25 percent to Rp 4,875 on
news that Asian retailer Dairy Farm International Holdings Ltd.
wants to buy all Hero stock at Rp 6,351 a share through the open
market.

On the downside, bellwether Telekomunikasi Indonesia fell 1.8
percent to Rp 5,600 on profit taking after it gained 12 percent
last week.

Dealers said they expect shares to continue to trade higher on
Tuesday on followthrough buying in bank and consumer blue chips.