Rupiah, stock prices surge, driven by investor confidence
Rupiah, stock prices surge, driven by investor confidence
JAKARTA (JP): The Indonesian rupiah rose 5.6 percent, while
the Jakarta Stock Exchange benchmark index touched the 700 point
level on Tuesday after Monday's landmark general election.
Currency dealers, stockbrokers and analysts agreed the sharp
rise was driven by foreign investor confidence in the country's
economic prospects, following a relatively peaceful, free and
fair election.
The rupiah shot to 7,610 against the U.S. dollar in morning
trade on the Jakarta spot market, before closing at 7,650,
compared to 8,105 on Friday.
Jakarta's financial market was closed on Monday for the
election.
A dealer with a local foreign exchange bank said offshore
operators continued to unload their dollar holdings, following
early indications that the major opposition party, the Indonesian
Democratic Party of Struggle (PDI Perjuangan), led the vote
count.
"Most offshore players were long on dollars, and they wanted
to reduce their position by selling dollars, fearing that the new
government would fix the rupiah against the dollar at a much
lower level," the dealer said.
PDI Perjuangan's executive, Kwik Kian Gie, has floated the
idea of fixing the rupiah rate at Rp 5,000 against the dollar.
Another dealer said the decision of the International Monetary
Fund (IMF) to disburse a $450 million loan to Indonesia also
boosted the rupiah.
"Today, the rupiah was supported from many fronts, from
successful elections to the disbursement of IMF loans. All the
news coming in was positive."
On Tuesday, Bank Indonesia Governor Sjahril Sabirin said the
ideal level of the rupiah was between Rp 7,000 and Rp 7,500 on
the back of increasing confidence spurred by the country's smooth
general election.
He said at this level the rupiah was neither undervalued nor
overvalued compared to the currencies of other crisis-hit nations
in the region.
"Between Rp 7,000 and Rp 7,500 is quite a good range for the
rupiah," he said on the sidelines of a senior ministers meeting.
Sjahril said there was a good chance the currency would
strengthen to the Rp 6,000 level by the end of the year, if the
current positive trends continued.
He said the central bank would not intervene on the foreign
exchange market to prop up the rupiah.
Bullish sentiments were also evident on the Jakarta Stock
Exchange (JSX), with the benchmark index breaking through the
psychological barrier of 700 points for the first time since July
1997.
The JSX Composite Index closed at 686.94 points, or 12.18
percent higher than Friday's level of 612.37, with trading value
reaching Rp 1.5 trillion.
Gainers outperformed losers by 192 to 2, with 32 counters
unchanged.
Institutional sales broker at Trimegah Securindolestari, Vonny
Juwono, said investors appeared happy with the voting process,
and were confident the election would bring changes to the
country.
"The market is confident the election will produce the
required political stability, which is important for the recovery
of the economy," she said.
Bahana Securities associate director and head of equity sales
Andre Cita concurred, saying that foreign fund managers were
flocking to the market, following the successful elections.
"It's all very positive. We expect more foreign funds will
enter the local market," Cita said.
He said by year end, the index would pass the 800 point level
as "a lot of money is still sitting on our doorstep waiting for
the right moment to enter".
However, he cautioned that the market would experience
corrections on its way toward the 800 point level. "Correction is
a healthy phenomenon in any market. And everybody should be ready
for that." (rei/rid)