Rupiah set to strengthen after IMF's latest loan
Rupiah set to strengthen after IMF's latest loan
Dadan Wijaksana, The Jakarta Post, Jakarta
The rupiah is expected to remain firm against the U.S. dollar
in the coming week amid continued bullish sentiment in the
market, with analysts predicting the local unit to test the level
near Rp 8,500.
Last week, the local unit closed stronger at Rp 8,630 against
the American greenback, than Rp 8,740 the week before.
Analysts Ferry Latuhihin and Wiwan Wiradjaja agreed that the
overall sentiment in the market was positive and the rupiah still
had a good chance of strengthening next week.
"The rupiah has tended to strengthen due to the disbursement
of the IMF's latest loan tranche, coupled with the recent upward
trend of regional currencies against the dollar," Wiwan told The
Jakarta Post over the weekend.
The slower-than-expected U.S. economic recovery has been
mostly to blame for the dollar's recent poor sentiment against
regional currencies.
The International Monetary Fund agreed last week to disburse
US$358 million of its latest loan tranche to the country, as part
of a $5 billion loan program.
The fund said the approval reflected the country's encouraging
economic performance.
The IMF is administering a three-year $5 billion loan program
aimed at spurring economic reform in Indonesia. The disbursement,
once completed, would raise Indonesia's total borrowing under the
program to about $2.6 billion.
However, Ferry said the IMF's approval for the loans had
already been calculated by the market, and that there was nothing
surprising about the disbursement. "It's only enhancing the
credibility of the country," he said.
Even without that, the rupiah would still be on the rise as
the market is gearing up to absorb a significant dollar supply
from offshore.
"The dollar supply will come from foreign investors interested
in the IBRA's massive sales of assets. This should have a good
impact on the rupiah, as they have to convert their dollars into
rupiah," Ferry added.
The Indonesian Bank Restructuring Agency is currently
launching the sales of some Rp 150 trillion worth of assets.
The sales of assets, which are made up of commercial and
corporate debts, will be using a combined mechanism of direct
selling and tenders.
Also, both analysts were of the opinion that the central bank
would keep an eye on the rupiah's performance, with a strong
possibility of intervening to make sure the rupiah moves within a
low range of volatility.
All this would maintain the recent upward trend of the local
unit.
On the stock market, after posting a 3.5 percent drop last
week on huge profit-taking, the Composite Index is set to rebound
in the coming week.
The index dropped 19.141 points over the week to close at
525.86 points from the previous week's closing at 545 points.
"That correction was normal, and with the overall market
sentiment still positive at both the corporate and macroeconomic
levels, I think the index is bound to rebound this week," Ferry
said.
There will also be some "window-dressing activities" from
corporations, especially blue chip companies, to boost their mid-
year portfolios ahead of the end of June, Ferry added.
The daily volume last week averaged 607.7 million shares
valued at Rp 396 billion ($45.9 million) compared to the previous
week's 987 million shares valued at Rp 703 billion.
State-owned telecommunication firm Telkom lost Rp 200 over the
week to Rp 4,075 and state international call operator Indosat
closed Rp 200 lower at Rp 11,250.
Cigarette maker Sampoerna dropped Rp 300 over the week to Rp
4,175 while rival Gudang Garam fell Rp 1,500 to close at Rp
10,050.
As for the impact of the Manulife case on the stock market,
Ferry said that so far, the impact was insignificant.
Manulife Indonesia has appealed to the Supreme Court against
the shocking June 13 commercial court ruling, which declared it
bankrupt.
The unit of Canada's Manulife Financial Corp. was sued by the
now-defunct former partner, PT Dharmala Sakti Sejahtera, over the
non-payment of a 1999 dividend.