Rupiah likely to strengthen: Analyst
Dadan Wijaksana, The Jakarta Post, Jakarta
The prevailing bearish mood over the U.S. dollar, coupled with expected good progress in the massive asset sales program conducted by the Indonesian Bank Restructuring Agency (IBRA) will likely keep the rupiah on its upward trend this week, an analyst says.
After gaining ground last week, the local unit will still have a good chance of rising further against the American greenback, according to a currency analyst at an international bank.
"Those external and internal developments would provide positive sentiment for the rupiah. This would keep the rupiah to hover below Rp 9,000 per dollar," the analyst, who wantd to remain anonymous, told The Jakarta Post over the weekend.
Last week saw the local currency bounce back from the previous week's closing of Rp 9,100 -- which was the lowest level in two months -- to close at Rp 8,800 per dollar.
Aside from the dollar's shaky performance against almost all currencies across the region, the suspected buying of the local currency by foreign investors to pay for a stake in state-run telecommunication firm PT Telkom was believed to be a factor behind the rupiah's rise.
Foreign funds - the main buyers of the 3.1 percent stake, which raised US$125 million for the government - exchanged dollars for rupiah Friday to settle their purchase. The sale of the stake in the company was part of the government's privatization program.
The American dollar has been in the doldrums, moving downwards in line with the slump of Wall Street stocks following a string of book-keeping scandals involving big corporations such as Enron, WorldCom Inc. and Merck & Co.
This boosted the performance of Asian currencies last week.
"So far, I see no signs just yet that the bearish sentiment over the dollar would stop. And combined with IBRA's ongoing assets auctions, this should all give a boost to the rupiah," the analyst said.
The agency is in the process of selling Rp 145 trillion worth of its non-performing loans. More than 200 investors, mostly foreigners, have registered and submitted bidding prices for those assets.
IBRA has said that it expects to collect at least Rp 20 trillion from the sales.
However, the analyst warned that the rupiah's progress would be marginally limited by concerns over rising political tension ahead of the People's Consultative Assembly's (MPR) annual session, scheduled for Aug. 1 - 12.
The lingering frictions among politicians have renewed fears over possible instability and security disturbances.
"Concerns among market players over this would cast shadows over the rupiah's buoyant sentiment," he added.
With regards the stock market, analysts said, the Jakarta Composite Index would remain under pressure amid continued uncertainty resulting from investors' decreasing confidence worldwide in big corporations' financial statements.
A dealer with a foreign-based brokerage said that lingering concerns over the U.S. accounting scams would prevail this week.
"The bad mood in the U.S. will still affect stock markets across the world, and Jakarta is no exception," he said.
Despite the bad sentiment however, the index still managed to close last week higher at 484.850, 5.237 points or 1.1 percent higher than the previous week.
Last week's daily volume averaged 773.8 million shares valued at Rp 617.1 billion (US$68.5 million) compared to the previous week's 368.96 million shares worth Rp 296.6 billion.
PT Telkom rose Rp 150 over the week to close at Rp 3,850 while state international call operator Indosat lost Rp 450 to Rp 9,850.
Cigarette maker Sampoerna closed 100 rupiah higher over the week at 4,200 while rival Gudang Garam was down Rp 250 at Rp 9,300.