Rupiah, stocks cold on new IMF deal

JAKARTA (JP): The country's financial market was unmoved by a new agreement between the International Monetary Fund (IMF) and the government yesterday.

The rupiah was locked at 14,800 against the U.S. dollar almost the whole trading day and the stock market fell 0.5 percent, currency dealers and stockbrokers said.

They said regional bearish sentiment and domestic political uncertainty overshadowed the IMF deal and continued to cloud the local market.

"There is no surprise at all in the new agreement. The market has anticipated and discounted this good news," a chief dealer with a local private bank said.

He said the rupiah opened at 14,700 against the U.S. dollar in a thin market then weakened to 14,900 in mid-morning before closing at 14,800, similar to Wednesday's close of 14,850.

The Indonesian government signed the second supplementary memorandum of reform with the IMF yesterday outlining measures to revive the country's embattled economy. The agreement is a prerequisite for the resumption of the next US$1 billion loan from the IMF.

The chief dealer said that the $1 billion loan from the IMF, despite being positive, would not be able to revive the country's financial market even for a short-term period.

Dealers also attributed the weak rupiah to unresolved political uncertainties at home which had also impaired new portfolio investment in the country.

High demand from local commercial banks wishing to purchase dollars to settle their foreign obligation and trade finance arrears by the end of this month also slashed the upward trend of the rupiah against the American greenback.

Following the sluggish rupiah, stock prices on the Jakarta Stock Exchange (JSX) fell 0.5 percent or 2.15 points to 428.81 on a total turnover of 191 million shares worth Rp 163 billion (US$11.01 million).

Stockbrokers said the index was driven down by a fall in price of state telephone giant PT Telkom, which accounts for 17 percent of market capitalization.

Telkom was down Rp 250 to close at Rp 3,800 on 1.35 million shares traded.

The fall of cigarette maker PT Gudang Garam also deepened the drop of the benchmark index. Gudang Garam slid Rp 150 to close at Rp 8,500 on 435,500 shares, while competitor PT H.M. Sampoerna also dropped Rp 75 to Rp 1,950 on 10.35 million shares.

Stockbrokers said trading in the embattled local market remained quiet for the whole day with certain domestic investors placing orders for short-term investment.

"In this uncertain situation, don't expect any foreign capital inflow to the market," a broker with Bali Securities said.

Head of research for Mashill Jaya Securities Tjandra Kartika said that the market gave a cool response to the conclusion of the agreement between Indonesia and the IMF.

He said the agreement contained no surprises for the market, noting that most macroeconomic indicators were in line with market expectations.

The new accord between the government and the IMF projects that the inflation rate in 1998 will rise to 80 percent, the 1998/1999 budget deficit will expand to 8.5 percent of gross domestic product and the economy will contract more than 10 percent.

The accord also sees the country's exchange rate at 10,000 against the U.S. dollar by the end of the 1998.

"I even expect the inflation rate to soar to 100 percent and economic growth of minus 15 percent," Tjandra said. (aly)