Rupiah stable, stocks gain on IMF announcement

Rupiah stable, stocks gain on IMF announcement

JAKARTA (JP): The rupiah stabilized against the U.S. dollar
yesterday as stock prices gained footing with the announcement by
the government that it would seek financial aid from the
International Monetary Fund (IMF).

Currency dealers said that the money market positively
responded to the announcement, with the rupiah strengthening to
3,640 against the greenback in the afternoon from the previous
low of 3,680.

However, the Indonesian currency lost ground in late trading,
closing at 3,665 against the opening of 3,600/30.

A chief dealer at a local bank said the market immediately
responded to the government move by selling dollars.

"For us, whenever there's good news, we sell dollars," he
said.

However, he said, persistent dollar demand from local
corporations to refinance their dollar-denominated debt was still
high, forcing the rupiah to slide again.

"Generally speaking ... the buying mood still dominated
trading activities in the forex market," he said.

Dealers said that volume was relatively light yesterday.

Economists and analysts have called on the government to take
"real measures" to recover investors' confidence in the rupiah.

"Despite a good (feeling), there was little response from the
market as the move was not a surprising one," Danareksa
Sekuritas' senior economist Raden Pardede told The Jakarta Post.

He suggested that the central bank, Bank Indonesia, provide
dollar loans instead of rupiah loans to local companies in order
to avoid a rush for dollars.

"Instead of providing rupiah, Bank Indonesia should provide
dollar loans. This is a real measure needed by the market," he
said.

Indonesia's decision to ask the IMF for help to bolster its
reserves and restore its financial sector hardly created a ripple
in other Southeast Asian currency markets, Reuters reported.

The Malaysian ringgit extended its gains as funds continued to
unwind dollar positions on growing optimism Malaysia would unveil
a market-friendly budget on Oct. 17.

Persistent buying of the ringgit against the Singapore dollar
by funds which had sold it down to record lows also helped boost
the ringgit to 3.1725/800 per dollar in the afternoon against
late Tuesday levels of 3.2780/830.

Dealers said Singapore Finance Minister Richard Hu's Tuesday
comments that the Singapore dollar had appreciated against a
trade-weighted basket of currencies fueled further buying of the
ringgit and Singapore dollar.

The Singapore dollar remained weak at 1.5580/90 to the U.S.
dollar after Hu's comments sent it diving to a 42-month low of
1.5650 against the U.S. dollar on Tuesday.

The Philippine peso steadied after the central bank intervened
repeatedly to sell dollars, as the peso hit a low of 35.90.

But analysts said an estimated $3 billion of unhedged short-
term foreign currency loans would keep the heat on the peso.

The Thai baht traded sluggishly all day with interest pinned
on next week's financial sector reform package. It was at
36.50/60 per dollar onshore against 36.45/36.75 late on Tuesday.
The offshore rate was at 35.65/36.15 against 35.70/35.90.

As the currency market stabilized, stock prices on the Jakarta
Stock Exchange (JSX) gained footing on the back of selective
foreign interest for second-line stocks.

The JSX composite index gained 0.9 percent or 4.99 points to
close at 518.94 yesterday.

Almost 335.32 million shares changed hands in the regular
market valued at Rp 412.12 billion rupiah (US$114.47 million).

A stock analyst with Harita Securities said that the
government's plan to approach the IMF sent a positive sentiment
to the market but did not really boost trading activities.

"Some choosy investors were looking for midsize stocks,
especially in the mining sector, which generates its revenue in
dollars... but the overall mood was gloomy," he said.

Brokers said that investors were still cautious with the
currency market as investors had lost confidence in it.

"The government's move to stabilize the currency is okay but
it is not strong enough to restore investors' confidence," an
analyst said. (aly)