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.