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)