Rupiah shoots up to 8,800 against dollar, stocks jump 8.4%
Rupiah shoots up to 8,800 against dollar, stocks jump 8.4%
JAKARTA (JP): The local financial market recorded significant
advances on Thursday, with the rupiah breaking the 9,000 level to
hit an intraday high of 8,800 against the U.S. dollar and share
prices jumping 8.4 percent, dealers said.
They said a bullish trend in the regional currency market
coupled with persistent talk of a possible introduction of
capital controls and dollar-selling by state banks were the
driving forces behind the rupiah's strong gains.
A chief dealer with a local private bank said: "I think
investors, especially from Singapore, are afraid of maintaining
their long-dollar positions for any longer because they sense the
strong likelihood of an imposition of capital controls in the
country."
The rupiah opened at 10,500 to the dollar but quickly shot up
to break the 9,000 level for an intraday high of 8,800 before
morning trading ended. It, however, fell slightly in the
afternoon to close at 9,100.
The rupiah closed on Wednesday at 9,500 and had been trading
near the 11,000 level last week.
Given the rupiah's strong showing over the past few days,
offshore operators -- the main players in the rupiah-dollar
market -- have been wary of building any new positions on the
dollar, dealers said.
The lingering fears of a possible imposition of capital
controls remained the dominant factor behind the rupiah's strong
gains on Thursday despite government denials of such a move.
Coordinating Minister for Economy Finance and Industry
Ginandjar Kartasasmita said on Thursday the government was
studying all options to improve foreign exchange flow management
but had ruled out the possibility of capital controls.
Besides the issue of capital controls, dealers also attributed
the bullish sentiment on the rupiah to the peaceful opening of
Megawati Soekarnoputri's congress for her faction of the
Indonesian Democratic Party in Bali, the country's main tourist
destination.
The rupiah's rally would, however, be curtailed by the
decreasing benchmark interest rates of Bank Indonesia's short-
term promissory notes (SBIs), the dealers said.
The auction of one-month SBIs on Wednesday produced a yield of
60.03 percent per annum, compared to 64.74 percent last week and
over 70 percent early last month.
The falling rates, however, would continue to boost equity
investments in the shattered local stock market, stockbrokers
said.
Share prices in the Jakarta Stock Exchange rose 8.4 percent,
or 22.38 points, to close at 288.55.
Trading volume totaled 358.15 million shares changing hands
valued at Rp 408.22 billion.
Gainers led losers 99 to 14 with 64 stocks remaining
unchanged.
Stockbrokers said the sharp rise was fueled by relatively
heavy foreign buying of certain selective stocks.
The strengthening rupiah and falling interest rates were the
main reasons driving foreign investors to reenter the market,
they said.
Bahana Securities associate director Andre Cita said the
market perceived some early signs of recovery in the country's
economy, prompting investors to enter the market.
"People have been waiting for good news so far ... and when
they see some, they just jump into the market immediately," he
said.
But he warned that the increase in stock prices on Thursday
would not be sustained for long since the country's economic and
political situations were still volatile.
"Investors will not really want to stay long in the local
market until they really see some good news coming down," he
said.
Most large-cap stocks rallied on Thursday, with market leader
telecommunications firm PT Telkom gaining Rp 175 to close at Rp
1,600 on 54.78 million shares traded. (aly)