Rupiah slides 7% to close at 8,600 against the dollar

JAKARTA (JP): The financial market sank again on Wednesday, with the rupiah sliding 7 percent to close at 8,600 and stock prices falling nearly 4 percent.

Currency dealers said that Indonesia's beleaguered rupiah took another fresh knock on Wednesday as offshore speculators dumped the currency on fears of the country's deteriorating political and economic conditions.

The rupiah, which closed at 8,050 on Tuesday and opened at 8,200 on Wednesday morning, crashed through the 8,500 level against the American dollar in late trading urged on by a lack of positive leads in the market and aggressive attacks by offshore players.

"It was just another sad day for the fate of the rupiah ... offshore speculators are returning to attack the rupiah again," a dealer at a local bank said.

"The rupiah is at a very critical level now, but I think the government will try to defend it," the dealer added.

Dealers said that several state banks, which in the past few days were buying dollars to settle their overseas obligations, stepped in to prop up the currency by unloading their dollar holdings.

"But this unfortunately failed to shore up the rupiah because the volume of the intervention was much smaller than the dollar bids by offshore speculators," the dealer said.

The governor of Bank Indonesia, Sjahril Sabirin, said on Wednesday that the government would continue to intervene in the market to keep the rupiah from sliding below the 8,000 level against the greenback.

"We will maintain a day to day control by doing what we have been doing all this time," he told reporters after the House of Representatives' plenary session on a central bank draft law.

However, many analysts doubted the effectiveness of the central bank's intervention, saying the uncertainty in the country's political and economic conditions would further undermine the Indonesian currency.

"The rupiah will possibly hit the 9,000 level if this fresh attack continues," another dealer said.

Like the rupiah, share prices on the stock market also fell sharply, taking a 3.9 percent plunge on Wednesday, with the Jakarta Stock Exchange (JSX) main price index falling 17.08 points to close at 419.10, with 321 million shares worth a total of Rp 650.28 billion changing hands.

Losers outdistanced gainers 77 to 21 with 81 stocks unchanged.

Stock brokers said that profit taking on blue chip stocks, which had rallied last week, combined with a generally sluggish sentiment in regional equity markets to help drag down local share prices.

"We can say that profit taking and the general fall in other equity markets was the reason behind the fall of our market," Vonny Juwono, an institutional sales broker with Trimegah Securindolestari, said.

A sales manager with Mashill Jaya Securities, Antonio Yongnata, said that foreign investors would not be tempted to stay in the battered local market because at the moment they had not found any incentives to invest in the local bourse.

"Foreign investors prefer to stay away from the market because the country is still struggling with its political and economic crises," he said.

Trimegah's Vonny said that foreign brokerage firms such as ABN Amro, Merrill Lynch Indonesia and Jardine Fleming Nusantara, which invested massive funds in most blue chip stocks last week, continued to discard their portfolio holdings.

The country's financial market will be closed from Jan. 16 to Jan. 23 to celebrate the Muslim Idul Fitri holiday. Trading activities will resume on Jan. 25. (das/aly)