Rupiah hits new record low as stocks continue to fall

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)

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