Rupiah, stocks fall on riots, regional weakness
JAKARTA (JP): The rupiah and local stock prices weakened yesterday despite the government's announcement on project rescheduling, dealers and brokers said.
Both foreign exchange and stock markets seemed to be riding more on regional weakness sentiments and fresh rioting in Ujungpandang, South Sulawesi, they said.
Spot rupiah weakened to a low of 2,955 against the U.S. dollar from an opening of 2,930/2,938 before settling at 2,948/2,952 at yesterday's close.
Sustained regional weakness and concern that the Ujungpandang riots might spread kept the rupiah under pressure and caused relatively heavy bidding on the U.S. greenback, dealers said.
They said one-week swaps declined while others were relatively stable, with liquidity improving further.
Overnight swap was at 1.3/1.5 points and tom/next at 1.1/1.2 points. One-week swap edged down to 7.0/7.5 from 9/15, one-month was at 38/43, two at 75/80 from 80/85, three at 105/110, six at 200/215 and one-year at 375/390 points.
Meanwhile, the Jakarta Stock Exchange composite index slipped 2.89 percent to 534.83 points at yesterday's close despite a 0.5 percent gain at the opening in anticipation of the retrenchment program.
Total trading turnover was 356.7 million shares worth Rp 392.1 billion (US$133.4 million).
Stock dealers said reports of a riot against ethnic Chinese in Ujungpandang, South Sulawesi, Monday and Tuesday may also have been partly behind the sell off.
They said the government's retrenchment program should have sent a positive signal to the market, but it failed to lift the market.
"What the government announced this morning is very positive. But I don't know if foreign investors still want something else, like the postponement of the national car project," said an analyst at a local securities house.
Minister of Finance Mar'ie Muhammad announced before a parliamentary plenary session yesterday that the government would postpone projects worth Rp 42 trillion (US$14.2 billion) and review others worth Rp 63 trillion until the region's financial crisis died down.
Banking stock analyst with Morgan Grenfell Asia Indonesia, Mirza Adityaswara, said yesterday's announcement did not come as a surprise.
"We have known that the government would reschedule some big projects, that it would continue to lower interest rates, that it would do this and that. But still, it will take some time for Indonesia's economy to recover," Mirza said.
Although Bank Indonesia, the central bank, will continue to cut rates on its short-term SBI papers, for instance, the rates will not reach the level before speculative attacks on rupiah in early July.
Mirza predicted that one-month SBI rates would not reach 10.25 percent recorded last July and would likely settle at somewhere between 16 percent and 19 percent.
Banking lending rates would, at best, decline to 23 percent to 25 percent -- far from the 17 percent to 20 percent level before July.
"It means slower economic growth, lower corporate earnings and swelling problem loans and the market has not discounted all of those possibilities," Mirza said.
He predicted the market would still be volatile in the short- term, depending on the direction of the rupiah exchange rate and banking borrowing rates. (rid)