Rupiah remains volatile, stock prices down 3 percent

JAKARTA (JP): The rupiah continued its volatility on Friday closing flat at 7,600 against the U.S. dollar as share prices declined almost 3 percent on the back of the heated political environment at home.

Currency dealers and stock analysts said that fears regarding the country's political uncertainty had discouraged investors to make a new position in both rupiah and stock trading.

Most investors were concerned that anti-government demonstrations, which have taken places almost every day in the country's major cities during the last two weeks, could get worse and turn violent.

The analysts said that the protests might increase ahead of the Special Meeting of the People's Consultative Assembly (MPR) mid next month.

The MPR will hold a special session on Nov. 10 to Nov. 13 to, among others, set the date and the rules of the general elections. But students and most of the newly established parties opposed the special session, saying that the MPR members, mostly elected during the Soeharto administration, were no longer legitimated to prepare such important events. They feared that legal products to be produced by MPR's special session would only benefit the ruling Golongan Karya (Golkar).

The analysts said most market participants did not want to build any new long dollar positions on fears that the country's political climate would turn into chaos, similar to the bloody May riots which led to the resignation of the former president Soeharto after 32 years in power.

"I think domestic factors tend the dictate the market now," the dealer said pointing out that previously the direction of the rupiah was moved by external factors like the movement of Japanese yen against the American dollar.

Dealers said that rupiah trading, in a range of between 7,400 and 7,700, remained thin for the whole day.

The rupiah, which opened at 7,500/7,700 closed almost unchanged at 7,600 on Friday, slightly firmer than Thursday close at 7,625.

Dealers said that limited dollar selling by state banks to guard the rupiah, had managed to keep the rupiah from breaching through the 8,000 psychological barrier.

"But we never know its direction in the coming days, if the 8,000 level is broken, we will have to see the rupiah touch 10,000 again," the dealer said.

Like the rupiah, share prices in the local market declined 2.7 percent (8.6 points) to 300.77 on a total turnover of around 243.41 million shares changing hands valued at Rp 960.19 billion (US$126.31 million).

Losers led gainers by 67 to 23 with 76 stocks remaining unchanged.

A broker with Trimegah Securindolestari attributed the sharp decline to investors who continued to dump blue chip stocks like PT Telkom, Indosat and cigarette maker Gudang Garam for profit taking.

"Almost all blue chip stocks were under heavy selling pressures on Friday,' the broker said.

Johanes Salim, an analyst with Mashil Jaya Securities said that most investors did not want to hold their stocks in the local battered bourse on escalating concerns over political tension at home ahead of the special meeting of People's Consultative Assembly next month.

"Most investors, especially the foreign ones are worried about the country's political situation," he said pointing out that anti-government rallies would weigh down the market sentiment.

Johanes said that most investors would move sideways in the coming days because they did not see any fresh leads to uplift market sentiment in the local shattered bourse.

"I think the stock prices will go down further as investors continued discarding stocks," he said.

Share price of PT Telkom slid RP 150 to Rp 1,875 on a total turnover of 8.01 million shares, Indosat slid Rp 100 to Rp 8,200 on 801,000 shares and cigarette maker PT Gudang Garam down by Rp 550 to Rp 6,850 on 1.21 million shares. (aly)