Rupiah plunges again, share prices up

Rupiah plunges again, share prices up

JAKARTA (JP): The rupiah nosedived again yesterday to 9,600
against the U.S. dollar despite the central bank's move to raise
its benchmark interest rates, currency dealers said.

Stock prices on the Jakarta Stock Exchange (JSX), however,
surprisingly rose -- for the first time in the last 10 trading
days -- by over 5 percent on short-term speculative trading by
certain foreign institutional funds, stockbrokers said.

Currency dealers said increasing the interest rates failed to
arrest the rupiah's fall because rioting in Medan, North Sumatra,
and tense demonstrations across the country continued to
overshadow the market.

"Political concerns are now more dominant factors in the
market. Any economic move would not be effective unless it is
supported by significant political reform," a local private bank
currency dealer said.

Bank Indonesia Governor Sjahril Sabirin acknowledged yesterday
that the rupiah was driven down by noneconomic factors.

Nevertheless, the central bank was trying to limit the fall by
again raising the benchmark rates of its short-term promissory
notes (SBIs) by 4 to 12 percentage points for all maturities.

Spot rupiah opened already low yesterday at 9,600/10,100
against the U.S. dollar, compared to the previous day's close of
8,950, dealers said.

The rupiah, however, recovered slightly to around 9,250/9,500
during the lunch break after the central bank announced the
increase in SBI rates. But it closed weaker at 9,500/9,700.

Despite the fall of the rupiah and higher interest rates,
stock prices on the JSX made 5.3 percent gains yesterday.

The JSX Composite Index rose 22.15 points to close at 436.77
on a total turnover of 458.50 million shares changing hands in
the regular market worth Rp 525.93 billion (US$58.4 million).

State-owned Bahana Securities' head of institutional sales
Andre Cita attributed yesterday's surprising increase to massive
speculative buying by foreign investors on stocks with dollar
valuations like Telkom, Indosat and Tambang Timah.

"I think speculative buying on these stocks helped the index
to soar. But the increase will be just temporary because short-
term investors are trying to benefit from speculative trading,"
he told The Jakarta Post.

Telkom shares rose by Rp 600 to Rp 3,425 on a total turnover
of 28.23 million shares, Indosat climbed Rp 1,800 to Rp 12,950 on
a turnover of 232,500 shares and Tambang Timah by Rp 375 to Rp
6,100 on 917,000 shares changing hands on the regular market.

Andre, however, said the increase did not necessarily reflect
the rebound of stock prices as the country's political anguish
keep befogging the country's future prospects.

"There are a lot of problems out there to solve, especially
the political one," he said referring to widespread riots in
Medan and almost daily student demonstrations taking place in
most major cities across the country.

Stockbrokers said the market feared such student protests, in
which dozens of students have been wounded as security officers
fired tear gas and rubber bullets, would sprinkle and turn into
widespread social chaos, which would then worsen the political
situation.

Research director of Mashill Jaya Securities Tjandra Kartika
said if student demonstrations developed into massive protests,
and possibly rioting, sentiments on the local market would be
dampened.

As fears over the country's political balance were building,
investors dumped yesterday stocks with strong political
connections like Bimantara Citra, Citra Marga Nusaphala Persada
(CMNP) and Astra International, a stockbroker with W.I. Carr
Securities said.

"There are hardly any foreign investors keeping such
politically sensitive stocks any longer," the broker said.

Diversified Bimantara Citra, controlled by President
Soeharto's second son Bambang Trihatmodjo, fell by Rp 100 to Rp
575 on 30.32 million shares changing hands, toll road builder
CMNP, controlled by Soeharto's eldest daughter Siti Hardijanti
Rukmana, shed Rp 25 to close at Rp 525 on 18.25 million shares
traded.

The country's largest automaker Astra International, in which
the Soeharto-linked Nusamba Group has significant stakes, lost Rp
25 to close at Rp 1,150, with a total turnover of 42.69 million
shares. (aly/rid)