Rupiah slides back to 7,950, stocks up 4.5%

JAKARTA (JP): The rupiah failed to sustain Tuesday's gains against the U.S. dollar on Wednesday, sliding back to 7,950 at the close in a general retreat by currencies in the region, especially the Japanese yen, currency dealers said.

However, share prices in the local stock market advanced a significant 4.5 percent on the fresh inflow of offshore funds following the unveiling of the 1999/2000 state budget, stock brokers said.

Currency dealers said that the rupiah, which rallied to close at 7,825 on Tuesday after President B.J. Habibie presented the budget, slid back nearly to the 8,000 level on Wednesday due mainly to the negative impact of the general fall of the region's currencies.

"The fall of the Japanese yen helped push the rupiah down further against the U.S. dollar," a chief dealer with a local private bank said.

The Japanese yen weakened to end its Asian trading at 112.50 against the dollar on Wednesday, compared to its 111.53 close the previous day.

The rupiah ended trading 1.5 percent lower at 7,950 on Wednesday, compared to its 7,825 close on Tuesday.

Currency dealers said that fresh dollar bids by state banks, which usually enter the market to sell dollars to shore up the rupiah, partly contributed to the fall of the rupiah against the dollar on Wednesday.

"Certain state banks bought dollars, probably to finance the import of certain commodities ahead of the Idul Fitri holiday," the dealers asserted.

Overall trading volume remained thin, dealers said, as no fresh impetus to enter the market emerged.

"Also, the market has found a new game; the euro," another dealer said.

The rupiah, which was traded between 7,850 and 7,950 to the dollar, was expected to remain under pressure this week, trading in the range of 7,800 and 8,000.

"The rupiah could swell to 8,300 if there is any political unrest," a dealer said.

Unlike the rupiah, share prices on the Jakarta Stock Exchange (JSX) rose 4.5 percent on Wednesday, with the benchmark price gauge rising 18.37 points to 427.08 on a total turnover of around 434.65 million shares valued at Rp 521.55 billion (US$66.39 million).

Advancers outnumbered decliners 63 to 32, with 85 remaining unchanged.

Stockbrokers said that the market was bullish for the second consecutive day on Wednesday, supported by a combination of positive responses to the announcement of the government's state budget and the rise of other equity markets in the region.

"Bullish sentiment in the region's equity markets helped raise the local market," Vonny Juwono, an institutional sales broker with Trimegah Securindolestari, said.

The associate director of state-owned Bahana Securities, Andre Cita, said that the offshore funds moving into the market helped share prices to stage a strong rally on Wednesday.

"The inflow of fresh offshore funds raised the sentiment of the local market," he said, adding that foreign fund managers viewed the local market as another lucrative investment spot.

However, Andre remained cautious over the medium-term and long-term prospects for the country's financial markets because of the any unrest ahead of the general election in June would certainly kill investors positive sentiments.

"The bullish sentiment is short-lived because volatility will cause a major sell-off by investors," Andre said.

Trimegah's Vonny said that several foreign brokerage firms, such as Credit Lyonnais, SBC Warburg and Jardine Fleming Nusantara, and local firm Bahana Securities, were buying certain state-owned blue chip stocks on Wednesday. (aly)