Rupiah, stocks fall as election campaign starts

Rupiah, stocks fall as election campaign starts

Dow Jones, Jakarta

The rupiah fell to a 26-month closing low on concerns over the heating up of the political climate during the presidential election campaign, which kicked off on Tuesday.

The local unit closed at Rp 9,380 per U.S. dollar, down from its close on Monday at Rp 9,275. It's the lowest closing level since April 25, 2002, when it ended at Rp 9,385.

After a short break Monday, local companies bought dollars again on concerns over rising political tension during the month- long presidential campaign.

The country's voters returned a fractured parliament last month, and political fighting looks set to continue until voters go to the polls in July for Indonesia's first direct presidential election.

"Political concerns prompted local companies to buy the dollar to hedge offshore debts maturing in the next two or three months," a dealer said. "They don't think the dollar will weaken during the election period."

Charts are pointing to further upside for the dollar, which could test an October 2002 intraday high of Rp 9,425.

Dealers said they heard Bank Indonesia sold the dollar during Tuesday's session to help the local unit, but if it did, all it accomplished was to slow the rupiah's fall.

The rupiah has fallen 11 percent so far this year, fueling inflation in May.

The official statistics bureau said Tuesday that on-year inflation picked up in May to 6.47 percent from 5.92 percent in April.

Analysts said the central bank may be forced to hike local interest rates to nip inflation in the bud and support the rupiah.

Dealers expect the dollar to test Rp 9,400 on Wednesday.

Meanwhile, Jakarta shares ended marginally lower on worries that the rupiah will weaken further during campaigning activities, dealers said.

"It's a dull and weak market," said a trader with BNI Securities, adding that many investors were on the sidelines monitoring the early stages of the campaigning period.

The Jakarta Stock Exchange's main index ended down 1.314 points, or 0.2 percent, at 731.202, up from an intraday low of 727.498.

Decliners led gainers 59 to 32, with 73 stocks unchanged.

Volume was 479 million shares valued at Rp 312 billion.

Heavyweight Telekomunikasi Indonesia ended down Rp 50, or 0.7 percent, at Rp 7,350 and rival Indosat fell Rp 25, or 0.6 percent, to Rp 3,950.

Also lower were shares in Bank Rakyat Indonesia, which ended down Rp 25, or 1.5 percent, at Rp 1,700 and Bank Danamon, which fell Rp 50, or 1.7 percent, to Rp 2,925.

Dealers said late bargain-hunting in Bank Mandiri and consumer goods producer Unilever lifted the main index from its low.

Mandiri rose Rp 25, or 2 percent, to Rp 1,275 and Unilever gained Rp 25, or 0.7 percent, to Rp 3,625.

Dealers said they expect the market on Wednesday to trade flat to slightly higher on further bargain hunting.