Rupiah hits historic low as stock prices lose ground
Rupiah hits historic low as stock prices lose ground
JAKARTA (JP): The rupiah hit a historic low of 7,750 to the
U.S. dollar in the morning trading session yesterday before
recovering to 6,950/7,250 at the close on aggressive dollar-
buying by state-owned banks.
As the rupiah recovered, stock prices on the Jakarta Stock
Exchange (JSX) lost ground as most players were greatly concerned
with the persistent decline of the rupiah in the currency market
over the past few days, stock brokers said.
Currency dealers said the rupiah sank into unchartered
territory due to a regional market decline and heightened social
and political anxieties approaching the People's Consultative
Assembly meeting to elect a new president and vice president in
March.
The spot rupiah closed at 6,950/7,250 in Jakarta against an
opening of 7,000/7,200 in the morning session.
The rupiah has lost about 66 percent of its value against the
dollar since early July.
Dealers said most players were in a panic after the rupiah
broke 7,500 in the morning.
"It 's just a crazy market with a daily 10 percent decline
over the past few days," a chief dealer with local private bank
said.
"Demand for the dollar by local companies has declined today
(yesterday) and some investors have been seen selling dollars for
profit taking," the dealer said.
"Nobody expected the rupiah to fall to 7,750," another dealer
said.
Most dealers said volume remained thin with a limited dollar
supply in the market.
"The market remains thin and weak and there is no positive
news to shore up the rupiah," the dealer said.
Dealers said Bank Indonesia, the central bank, was not seen in
the market because previous intervention efforts failed to shore
up the rupiah.
"It's quite difficult for the central bank to intervene in the
market as the entire regional market has declined. Central bank
intervention might be effective if it's only the rupiah that
declines," a dealer said.
Dealers and economists also attributed the rupiah's persistent
fall to worries over the President's health after doctors advised
him to rest in December in the wake of an exhausting foreign
tour.
Economist Laksamana Sukardi said yesterday the persistent fall
of the rupiah would result in major corporate bankruptcies in
Indonesia.
"If the rupiah continues to fall against the American dollar,
many companies will collapse as they cannot finance the import of
raw and supporting material," Antara quoted him as saying.
He also feared the continuing fall of the rupiah would result
in layoffs and a decline in production at most industrial
companies.
Dealers and economists urged the government to launch major
political and economic reforms to heal the country's ailing
economy.
"To come out of this crisis, the government should make major
economic and political reforms, including transparency in the
succession issue," Laksamana said.
As the rupiah recovered, stock prices on the JSX fell sharply
by 2.08 percent.
"The rupiah is the main indicator for stock prices and there
will likely be no improvement in stock prices in the first
quarter this year," an analyst with Sigma Batara said.
Other analysts said with stock prices on the JSX already at
bottom levels, now would be the right time for foreign investors
to buy.
"But foreign investors are still worried about the political
and social situation in Indonesia," an institutional broker of
Trimegah Securities said.
Stock brokers said widespread rumors about a government plan
to cut the value of the rupiah also put pressure on the declining
stock prices.
The JSX composite index closed 8.57 points lower at 402.27
yesterday with about 378.42 million shares changing hand in the
regular market valued at Rp 406.27 billion (US$58.03 million).
(aly)