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)