Rupiah stable following U.S. interest rate cut

Rupiah stable following U.S. interest rate cut

JAKARTA (JP): The rupiah remained stable against the U.S.
dollar on Wednesday, closing at Rp 10,750 on the Jakarta spot
market, buoyed up by a 0.25 percentage point cut in U.S. interest
rates, currency dealers said.

Most shares in the local market remained weak due to
unfavorable regional conditions, but the main price index on the
Jakarta Stock Exchange (JSX) edged up slightly after a late
flurry of trading in several blue chip stocks.

Currency dealers said trading in the rupiah, which opened the
day at 10,850, was moderate because most dealers were still
reluctant to build new positions on it.

"The 0.25 percentage point cut in U.S. interest rates helped
to buoy rupiah trading," a chief dealer with a local private bank
said, adding that the interest rate cut merely prevented the
rupiah from falling against the dollar.

The U.S. Federal Reserve cut interest rates by 25 basis points
to 5.25 percent on Tuesday, the first cut in 32 months.

"The market expected the U.S. Federal Reserve to cut interest
rates by 0.50 percentage points," the dealer added.

Dealers said that political and social uncertainty, and
lingering street demonstrations would curtail the rupiah's
advance against the U.S. dollar in the days ahead, adding that
they expected the rupiah to remain above Rp 11,000 in trading.

Unlike the rupiah, most stocks on the battered local market
ended the day lower on Wednesday due to persistent selling
pressure exerted on selected stocks by foreign investors to
mitigate the negative impact of bearish sentiment in the regional
markets.

"I think the fall in other regional markets is responsible for
the decline in our market," a broker with Trimegah
Securindolestari said.

The JSX Composite Index, however, edged up 0.14 points to
close at 276.15, with a total turnover of 157.72 million shares.
The rise was attributed to a late surge in trading in blue chip
shares.

Losers outnumbered gainers 57 to 45, with shares in 73
companies ending the day unchanged.

The broker said that trading activities in the local market
had remained lethargic, with most foreign investors reluctant to
enter the fray. The daily transaction value on the market now
usually hovers at around Rp 150 billion, compared to the pre-
crisis level of Rp 500 billion.

"What most foreign investors want to do now is to shun our
market," the broker said, pointing out that a number of foreign
brokerage firms, including Indosuez WICarr, Jardine Fleming,
Credit Lyonnais and Vickers Ballas Tamara, were regularly net
sellers.

The head of research at BNI Securities, Adrian Lesmana, said
that political and social uncertainty at home, along with
persistent demonstrations in the capital and several other major
cities had further discouraged investors from placing funds in
the local equity market.

"Moreover, domestic investors are still showing a preference
for placing their funds in bank time deposits, which currently
offer a higher yield," he said, pointing out that domestic banks
offered interest rates in the region of 60 percent for one-month
time deposits.

Several big cap stocks ended the day lower, with state
telecommunications firm PT Telkom, which accounts for 17 percent
of market capitalization on the local bourse, sliding Rp 100 to
Rp 1,525 on 5.57 million shares traded. Shares in the mining firm
PT Aneka Tambang fell Rp 25 to close at Rp 1,200, with 3.73
million shares changing hands, and shares in Semen Gresik shed Rp
75, falling to Rp 6,000 on 616,500 shares traded.

Brokers attributed the fall in Semen Gresik's shares to the
disappointment felt by investors after hearing Tuesday's
announcement that Mexico's Cemex had succeeded with a bid to
purchase a 14 percent stake in Semen Gresik at only US$1.38 per
share.

"The market expected the price to be higher than the $1.38
Cemex offered on Tuesday," the Trimegah broker said. (aly)