Rupiah, stock prices surge on hopes of Megawati as VP

JAKARTA (JP): Stock prices and the rupiah surged on Thursday on hopes that Megawati Soekarnoputri would be elected the vice president.

The chairwoman of the Indonesian Democratic Party of Struggle (PDI Perjuangan) was elected later after the capital and currency markets closed.

Securities analysts said that local investors rushed into the market at the start of the afternoon session after Indonesian Military chief Gen. Wiranto and Golkar Party chairman Akbar Tandjung surprisingly withdrew before the voting began, boosting Megawati's chances of victory.

Megawati, 53, who was defeated in Wednesday's presidential election by Muslim leader Abdurrahman Wahid, better known as Gus Dur, comfortably saw off a challenge from Hamzah Haz, chairman of the United Development Party (PPP), the largest Islamic party in the national assembly.

Her loss on Wednesday sparked violent protests in several cities.

The Jakarta Stock Exchange Composite Index rose 32.06 points or 5.5 percent to close at 616.49 in heavy trading, with 1.65 billion shares valued at Rp 2.5 trillion.

Gainers beat losers 153 to 16 with 100 stocks unchanged.

The rupiah closed sharply higher at 6,950 against the U.S. dollar, compared to 7,450 on Wednesday.

Analysts said the hope that Megawati would be elected the vice president brought positive sentiment to both the rupiah and the local stocks because investors believed her election would ease social tension.

Thousands of Megawati's supporters took to the streets in several major cities, including Jakarta, on Wednesday to protest the results of the vote. Protests continued in major cities, including Medan, North Sumatra, and the resort island of Bali, on Thursday, during which several government offices were set on fire.

Equity research manager of PT Trimegah Securindolestari, Fajar R. Hidayat, said the market was in positive mood on Thursday due to expectations that Megawati's election as the vice president would halt the unrest.

Megawati's election will be positive for the market in the coming days, he said, adding that the President Abdurrahman- Megawati pairing was ideal because they complemented each other.

"Gus Dur is more of a domestic guy who understands Indonesia's politics well while Megawati is a person who is well known by the international community." He believed Megawati held the capability to be an effective lobbyist internationally.

Fajar said the market would monitor how the pair would proceed in selecting people for the government and their economic programs.

Yos Parengkuan, an equity analyst at state-owned securities company PT Danareksa, said the market still appeared volatile because profit taking could hit at any time on a hint of negative developments following the presidential and vice presidential elections.

"The index rose very sharply today, and profit taking will soon test its sustainability," he said.

Yos said that foreign investors were still very cautious toward the market, waiting for further developments as indications of the election of President Abdurrahman.

"The formation of a government under Gus Dur's leadership will create new market confidence which could invite foreign investors who are now mostly sidelined to reenter the market," he said.

The rupiah fell as low as 7,600 on the lingering negative sentiment from Wednesday before it began to recover as hopes developed that Megawati would be elected vice president.

State banks' selling of dollars also gave momentum in the strengthening of the rupiah.

The rupiah finally closed at 6,950 after Akbar Tanjung and Wiranto, who are closely associated with the New Order regime, pulled out the vice presidential contest.

Voting was in progress at the close of rupiah trading.

Dealers said the support level for the rupiah for now was at 6,800 because most market participants are already short of dollars. (udi)