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)