Rupiah, shares bleed for killed students

Rupiah, shares bleed for killed students

JAKARTA (JP): The rupiah plunged to almost 11,000 against the
U.S. dollar and share prices dropped 6.6 percent yesterday over
worries of escalating political tension following the shooting of
four students by security forces at a university demonstration on
Tuesday.

Currency dealers said the rupiah fell to as low as Rp 10,900
to the dollar on the Jakarta spot market before closing at Rp
10,600 compared to Tuesday's close of Rp 9,300.

They said the reason for the plunge was obvious: Jitters from
the increased political instability in the country prompted
people to trade their rupiah for dollars.

More than 2,000 students and opposition leaders gathered
yesterday at Trisakti University to mourn the death of the four
students shot to death at the campus in a rally demanding
President Soeharto step down.

Minister of Finance Fuad Bawazier said yesterday the weakening
of the rupiah was "the logical consequence of the current
development".

"Any situation which can weaken the rupiah must be avoided.
If the rupiah continues to weaken, it will add burdens to our
economy. Prices of goods will go up again, goods will be hard to
find and the people will suffer."

The escalating political tension could continue to pull the
rupiah down to between 15,000 and 16,000 to the dollar, said Lin
Che Wei, research director at PT SocGen Crosby Securities
Indonesia.

"The 15,000 level is on the horizon," he said.

Ferry Hartoyo, an analyst at PT Vickers Ballas Tamara, said
the government would push interest rates higher to stabilize the
currency, but it would not be effective due to the political
uncertainty.

"I'm certain the government will raise interest rates again to
prevent people from buying dollars. But it won't be effective,"
he said.

"The shooting of the students has made a lot of people angry
and scared."

Since the increasing social unrest could further weaken the
rupiah, Ferry said, inflation may go up since the country's
production system was heavily dependent on imported materials.

As the rupiah plunged, share prices on the Jakarta Stock
Exchange also dropped yesterday, with the Composite Index falling
28.46 points to 402.05. At one stage the index dropped below the
key 400-point level to 393.36.

Trading volume totaled 518.51 million shares valued at Rp
521.94 billion (US$49.53 million). Losers led gainers at 179 to
seven, with 17 counters unchanged.

Ferry forecast the market to fall to the 350 level if the
social unrest continued.

Lin agreed, saying foreign investors would not invest in a
country in which the government was shooting its own people.

He explained that some long-term investors had earlier planned
to invest in the market but pulled out due to the bloodshed.

Stockbrokers said most foreign and local investors dumped
shares, especially those with strong political connections, on
worries about the country's political situation.

"The market was spooked off," said a dealer at a joint-venture
securities house, adding that toward the end of the day there was
a slight rebound with some investors buying into bluechip
counters like fishing industry PT Daya Guna Samudera and
cigarette makers PT Gudang Garam and PT HM Sampoerna.

She said shares in automotive giant PT Astra International,
where the Nusamba Group which is linked to President Soeharto has
a significant stake, were the most badly hit, down Rp 275 to
close at Rp 1,000, with 68.36 million changing hands. Astra fell
to as low as Rp 975 before the close, she added.

Conglomerate PT Bimantara Citra, controlled by Soeharto's son
Bambang Trihatmodjo, shed Rp 100 to close at Rp 500, while toll
road operator PT Citra Marga Nusaphala Persada, owned by
Soeharto's daughter Siti Hardiyanti Rukmana, fell Rp 75 to Rp
450.

She also said that despite the falling rupiah, there had not
been significant arbitrage-related buying by foreign hedged
funds, which usually targeted dollar-valuation stocks like
telecommunications firms PT Telkom and PT Indosat. (rei/rid)