Rupiah hits new record low as stocks continue to fall
JAKARTA (JP): The rupiah and stock prices on the Jakarta Stock Exchange (JSX) touched new lows yesterday due to regional weaknesses, stockbrokers and dealers said.
Currency dealers said the rupiah touched a new historic low of 3,980 against the U.S. dollar in the spot market yesterday before easing to 3,930/50 at the close in Jakarta.
They said that the rupiah ended at 3,985 in Singapore and 3,920/45 in London.
"There was nothing to give the rupiah a positive push. Even the central bank has been absent from the spot market for some time," a local bank chief dealer said.
He said the central bank was not seen intervening in the spot market yesterday, but it sold dollars and drained rupiah from the swap market and money market.
"I think it was this move that pushed the rupiah to recover after touching a new low yesterday," the dealer said.
He said the central bank intervened in the swap market to move short-dated swaps away from negative territory as offshore and onshore operators were flush with cash.
Cheap swaps at the short end had made long dollar holdings attractive in the morning, he said.
Dealers said the rupiah was under heavy trade yesterday following the statement from the Indonesian finance minister that joint intervention with Singapore and Japan to support rupiah was temporarily suspended.
Economist Sjahrir said in Bandung, West Java, that the continuing decline of the rupiah was also driven by recent confusion concerning the use of stand-by loans committed by Singapore to Indonesia.
"The government and the private sector should stop exchanging accusations with each other because it will only continue to rock the rupiah," Sjahrir said.
The government should be realistic that the current crisis was driven by huge private offshore debts, and therefore, it should help the private sector to settle those debts.
"The International Monetary Fund would not have come here if we had had no huge private debts," he said.
Dealers said indebted local corporations continued to look for dollars in the market yesterday, fearing that the rupiah would continue to drop to an unseen bottom as it was not guarded by the central bank.
The rupiah has fallen steadily since July, with a brief stabilization in early November after the IMF provided a financial bailout package to Indonesia to bring relief to its economy.
A persistent decline in the rupiah and the stock market, along with other regional markets, proved that foreign investor confidence in the Asian stock and financial markets had not recouped yet.
"Nobody knows when foreign investor confidence will recover. But it will entirely depend on the way most Asian countries manage their economic and political problems," a dealer with a local private bank said.
The JSX composite index was down 1.2 percent or 4.6 points to close at 389.68 yesterday, with a total turnover of 376.08 million shares valued at Rp 295.75 billion (US$77.81 million).
Mashill Jaya Securities' head of research Tjandra Kartika blamed the decline in stock prices on the weakening rupiah, negative corporate earnings and the upcoming year-end holiday.
"With some investors taking their holidays in the coming weeks, there will be practically no more investors in the market," he said.
He said corporate earnings were also negative, with many companies downgrading their internal earning forecasts.
Lippo Securities sales manager Harry Danardojo said most investors had not found any reason to enter the stock market now due to the continuing devaluation of the rupiah.
"Who would want to invest in the market these days when the rupiah continues to drop against the U.S. dollar?" he asked.
Only smart investors would still selectively seek investment opportunities in the undervalued stocks, he added.
JSX management data showed that around 40 percent of stock prices had been traded under their par value and around 60 percent had been traded under their book value prices as of November. (aly/43)
Debate -- Page 10
Bapepam -- Page 12