Rupiah stable as stocks fall below 500-point level

JAKARTA (JP): The rupiah stabilized against the American greenback as the central bank intervened in the market while the stock market bore the brunt of weakening regional markets, dealers and brokers said.

The rupiah closed firmer against the dollar yesterday at 3,560/90 compared to the opening of 3,610/30 in the morning session after it reached its lowest level of 3,680 in midday trading when Bank Indonesia, the central bank, stepped in with a small amount of dollars, foreign exchange dealers said.

"But Bank Indonesia sold only a small amount of dollars in the market to keep the rupiah from exceeding the 3,700 level," a local bank chief dealer said.

He said that persistent demand by some local companies to purchase dollars weakened the rupiah yesterday.

"But trading activity was relatively thin," a dealer said.

Dealers said the market was now waiting for the announcement of the much talked-about financial package from the International Monetary Fund (IMF) to improve Indonesia's economy in the face of the currency crisis.

Currency dealers said the relaunch of money market securities (SBPU) did not help the rupiah strengthen much against the dollar as the instrument was provided only to a limited number of banks.

The central bank reopened its SBPUs on Monday to inject more cash into the country's ailing economy.

As the rupiah stabilized, share prices on the Jakarta Stock Exchange (JSX) declined sharply with the main price gauge plunging below 500 points on regional market losses, brokers said.

Sales director of Asian Development Securities, Naotake Ikeda, said selling pressure on the JSX was quite strong due to general bearishness across the region and the free fall of the Hong Kong stock market.

"The fall of regional share prices coupled with uncertainty on the financial assistance package from the IMF are the key factors behind the selling sentiment by most investors," Ikeda told The Jakarta Post.

The composite index closed 2.2 percent, or 11.09 points, lower to 494.13 yesterday with a total 658 million shares changing hands in the regular market valued at Rp 479 billion (US$136.85 million).

"As stocks in Hong Kong tumbled by more than 10 percent, investors in Jakarta stayed away from the market," vice president of Mashil Jaya securities Tjandra Kartika told The Jakarta Post yesterday.

"I think the downward trend is not only for Jakarta but for the whole region," he said.

Stockbrokers said most investors tracked sidelines as there was no fresh positive incentives in the market.

"Given the weakening regional markets, most investors have withdrawn from the market," Ikeda said.

However, a stockbroker with a joint-venture brokerage firm said the result of negotiations between the IMF and the government could bolster sentiment as most investors had adopted a wait-and-see attitude.

"But if the announcement is delayed, the market may be disappointed," Ikeda said.

Stockbrokers and analysts said that the market expected the financial assistance package from the IMF would help stabilize the rupiah.

"Most investors are waiting for the announcement of the package ... and if there is any effect, it will be in the long term," Tjandra said.

"But for the time being, the market will continue to stay like this until some time next month," he said. (aly)