Rupiah regains strength, stocks weak

Rupiah regains strength, stocks weak

JAKARTA (JP): The rupiah sharply recovered yesterday against
the U.S. dollar in early trading but weakened in the afternoon on
a surge in demand for the greenback.

Share prices on the Jakarta Stock Exchange (JSX) lost several
points at close in thin trading.

Foreign exchange dealers said the rupiah closed at 3,410/20
against an opening of 3,370/90 after hitting a one-day high of
3,350 on heavy sales of one-year forwards by overseas operators.

But it was still lower than the lowest level it recorded
Wednesday.

The dealers said that market sentiment seemed to have improved
slightly as compared to Wednesday's trading which saw the rupiah
plunge to an historic low of 3,470 against the American dollar.

"Rupiah is not so volatile today and we see a two-way trade
compared to the previous days' one-way trade," Bank Bira's senior
dealer Rudy Gandhi said.

However, he said, persistent demand by local companies to buy
dollar deteriorated the rupiah trading, causing the rupiah to
slip to 3,420 in the afternoon.

Other forex dealers said there were still a handful of local
companies buying the dollar to cover their dollar denominated
debt which recently matured.

"I think the strong demand for dollar will make it difficult
for the rupiah to sustain its strength," Bank Bira's Rudy said.

He said the volume of forex trading was relatively small
hovering between US$200 million and $300 million, much lower than
the average $4 billion before the rupiah was floated in early
July.

Yesterday's modest trading was marked by the fall of overnight
dollar rates to as low as 8 percent from 25 percent Wednesday and
Tuesday.

Other analysts said the rupiah's moderate trading partly
resulted from a reprieve on other regional currencies as traders
suspended their raid to take profit on the dollar's spectacular
rise in the last few days.

The analysts said the recent sharp drop in the rupiah
indicated the loss of public confidence in the currency.

"I think the government should step in to stop the rupiah's
downfall. If not, the fall will continue, ignoring the strength
of the country's economic fundamentals," one analyst said.

The currency anguish dampened the buying sentiment at the
Jakarta Stock Exchange (JSX).

Investors remained reluctant to enter the market even though
most of the share prices were very cheap, said a securities
dealer.

"It is certainly time to buy. But no investor wants to benefit
from the cheap prices," he said.

The JSX's Composite Index, the main price gauge in the market,
fell 0.01 percent to close at 536.92 in thin trading, with only
206.53 million shares changing hands at Rp 284.87 billion ($86.32
million), or a half of the average daily transaction value in
June.

"There are no positive market incentives which can boost stock
trading and most investors have pulled out of the market
already," Christina Lim from Harita Securities said.

She said sluggish market sentiment would continue in the
coming weeks when most listed companies had to announce their
lower-than-expected third quarter results.

She said the more than 25 percent fall in the rupiah's value
had severely hit the country's business activities and this would
result in a decline in corporate profit growth.

Another analyst with a joint venture securities company said
the market would stabilize if uncertainties in the currency
market died down.

"But given the current situation, no one knows when the
currency will stabilize.... we are still facing a very difficult
time now," he said. (aly)

Currency -- Page 11