Rupiah stabilizes against dollar as stocks lose ground

JAKARTA (JP): The rupiah continued to stabilize against the U.S. dollar yesterday to close at 3,250/70 in comparison to the opening of 3,200/30 in the morning session after Bank Indonesia, the central bank, stepped in the market several times.

"The central bank was seen in the market selling dollars when the rupiah was at 3,210 and 3,240," a chief dealer with a private bank said.

The dealer could not confirm the amount of dollars sold.

Dealers said swap rates increased in both domestic and offshore markets on fears of tight rupiah liquidity following concerted intervention by three central banks on Monday.

"The persistent intervention by the central banks was likely aimed at bringing the rupiah to below 3,000," a dealer said.

Dealers said intervention by the central banks of Indonesia, Japan and Singapore had helped to ease currency jitters in Indonesia.

They said the intervention was effective in preventing the crisis in Indonesia's currency from spreading to other financial markets in the world.

"I think the IMF has made Indonesia a model for other Asian countries in the way it handles its economy from deteriorating," a dealer said.

The monetary authorities of Indonesia, Japan and Singapore stepped into the Singaporean foreign exchange market Monday to prop up the Indonesia rupiah by selling a large amount of U.S. dollars.

The rupiah, severely hit by the domino effect of the Thai baht devaluation in early July, has lost almost 30 percent of its value against the greenback.

The rupiah fell to a historic low of 3,850 on Oct. 6, just two days before the Indonesian government announced its plan to seek financial assistance from the International Monetary Fund (IMF).

The IMF and other multilateral institutions agreed last week to provide US$23 billion in aid to Indonesia to help restore market confidence in its economy.

Currency dealers also attributed yesterday's firming rupiah to tight liquidity in the market, which prevented people from making speculative attacks on the rupiah.

However, the stabilizing rupiah failed to send a positive sentiment to share prices on the Jakarta Stock Exchange (JSX) as the main price index ended 1.4 percent lower, or 6.86 points, to 494.84 yesterday.

Total turnover was 354.6 million shares in the regular market valued at Rp 450.5 billion (US$138.61 million) yesterday.

A director at Asian Development Securities, Naotake Ikeda, said that domestic and foreign investors stayed away from the market as trading activities lacked direction.

"I think investors have realized the significance of the government reform package, but they do not find any clear direction in the short term," he said.

"Investors are still concerned about measures to be taken by the government to help stabilize the economy," he said.

An equity manager of HSBC Securities Indonesia, Phua Kok Kim, said investors were still cautious about banking stocks and the banking system in general in the face of the liquidation of 16 banks.

He said news of businesspeople who wanted to sue the minister of finance over the closure of their banks had made foreign investors apprehensive about the future of the country's economy.

"I think the move was to test the strength of the central bank against these politically well-connected businesspeople," he said.

The government announced last week the closure of 16 insolvent banks, including Bank Andromeda, Bank Jakarta and Bank Industri, which are controlled or partly owned by businesspeople with powerful political connections.

Bank Andromeda is 50 percent owned by timber tycoon Prajogo Pengestu and 25 percent, respectively, by Bambang Trihatmojo, the second son of President Soeharto, and Hendry Pribadi, of the Nawan Panduta (Napan) group.

While Bank Jakarta is owned by President Soeharto's half- brother Probosutejo and Bank Industri is 60 percent owned by the Pension Fund Foundation of Bank Rakyat Indonesia, 24 percent by Herry Widjaja, 8 percent by Mrs. Siti Hediati Prabowo, daughter of President Soeharto, 2.4 percent by Okie R. Lukita and 1.6 percent by The Tje Min.

The disclosure of the 16 ailing banks were reported to have sparked bank runs in several cities. Some banks were also reported to have limited the amount of funds which could be withdrawn by each depositor.

Depositors of several banks in Jakarta complained that they were only allowed to get as much as Rp 500,000 of their funds. (aly)