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.