Rupiah still weak and stocks fail to sustain gains

Rupiah still weak and stocks fail to sustain gains

JAKARTA (JP): The rupiah closed below the 9,000 mark against
the U.S. dollar yesterday, and stock prices on the Jakarta Stock
Exchange (JSX) failed to sustain their previous gains due to
prevailing political concerns, dealers and stockbrokers said.

They said the market remained cautious that the current social
anguish would turn into chaos and political instability.

Nevertheless, the rupiah closed 4.7 percent firmer yesterday
at 9,100/9,200 from the previous day's close of 9,600 due to Bank
Indonesia's intervention in the money market, currency dealers
said.

They said the central bank was seen intervening in the forward
market earlier yesterday by offering higher interest rates for
one-week promissory notes (SBIs) than the official level.

"Bank Indonesia was offering a 56 percent rate for one-week
SBIs, above the official rate of 54 percent," a local bank chief
dealer said.

"This helped the rupiah to strengthen for a while though the
overall sentiment is still gloomy."

Bank Indonesia raised benchmark SBI rates Thursday by 4 and 12
percentage points for all maturities, with the highest yield on
one-month SBIs at 58 percent per annum.

Despite the attractive yield, dealers said that concerns of
social unrest continued to dictate the direction of the market.

"Monetary policies alone have proven to be ineffective in
improving the rupiah so it should be combined with political
ones," the dealer said.

Although the rupiah ended firmer, stock prices on the JSX lost
0.4 percent, with the JSX Composite Index closing down 2.12
points to 434.65 yesterday from 436.77 Thursday.

A total of 383.49 million shares changed hands on the regular
market which were worth Rp 382.35 billion (US$42.48 million).

Harita Securities' managing director Christina Lim said
sentiment in the local stock market would remain bleak due to the
central bank's high interest rate policy.

"It is understood that stock prices will continue to fall as
investors will sell their stocks to benefit from a higher yield
in time deposits," she said.

A broker with BZW Niaga Securities said some foreign
institutional investors were discharging the dollar-valuation
stocks like Telkom and Indosat they bought Thursday to arbitrage
the fall in the rupiah.

Telkom and Indosat shares are quoted locally in rupiah and
traded abroad in foreign currency in New York, and arbitraging
involves taking advantage of differences in price reflected by
exchange rate fluctuations.

The Telkom share price shed Rp 50 to Rp 3,275 on a total
turnover of 7.78 million shares and Indosat shares dropped Rp 950
to Rp 12,000 on a total turnover of 45,500 shares.

Overall trading activities, however, remained lethargic for
the whole trading day as most investors were still on the
sidelines, believing student demonstrations would continue to
befog the country's political climate.

Though Medan in North Sumatra was relatively calm yesterday,
angry protests against President Soeharto escalated again in some
major cities yesterday.

"The overall sentiment remains sluggish due to escalating
political woes across the country," Sigma Batara Securities' head
of research Fadjar Limin Sutandi said.

He said the government should properly address the country's
political misery first before introducing any other economic
measures as the previous monetary and economic moves failed to
bring the country out of its worst crisis in decades. (aly)