Rupiah, stocks gain footing in thin trade
JAKARTA (JP): The rupiah and share prices continued to gain a footing in thin trade as currency operators and stock investors benefited from the upbeat momentum resulting from the government's new economic measures.
The spot rupiah ended firmer at 9,850/10,800 against the U.S. dollar in Jakarta compared to an opening of 10,500/11,500 in the morning.
Stock prices on the Jakarta Stock Exchange (JSX) also felt the fruits of the government's latest reforms, with the main price index surging 2 percent.
At its current level, the rupiah has lost 78 percent of its value against the dollar from its previous rate of 2,450 in early July last year.
The rupiah had a bright performance on Tuesday when it managed to strengthen to 10,900/11,300 from 13,500/14,500 a day earlier following the government's new economic measures.
"I think the improved sentiment in the rupiah was strongly supported by the announcement of the bold banking measures Tuesday," a chief dealer with a local private bank said.
The government announced Tuesday the latest package of banking reforms, including government guarantees for depositors and creditors of the country's commercial banks, the establishment of a new institution, the Indonesian Bank Restructuring Agency, and the appointment of Radius Prawiro by President Soeharto to negotiate a resolution on Indonesia's crippling mountain of corporate debt to temporarily halt servicing corporate debt.
Dealers said the rupiah's movement did not really reflect the real conditions of the market, given the light volume of trading.
"I do not see any significant transactions in the market yesterday as main players in the region have been on holiday," the dealer said.
Financial markets in Hong Kong, Kuala Lumpur, Seoul, Shanghai, Singapore and Taipei were closed yesterday to celebrate the start of the Year of the Tiger on the Chinese calendar.
The holiday mood will likely continue until next week as most financial markets in the region will be closed today and tomorrow for Idul Fitri, marking the end of the Moslem fasting month of Ramadhan.
There will be no central bank clearing in Jakarta today and the stock market will also be closed today and Friday.
The foreign exchange and stock markets will resume trading again on Monday, Feb. 2.
Dealers and brokers said business activities would slow down prior to Idul Fitri festivities.
"It's common to see the slowdown of economic activities prior to Lebaran," a dealer with a private bank said.
But currency dealers were still cautious whether the rupiah would be able to maintain its upward movement because its surge in the last few days took place in the absence of big players from Singapore and Hong Kong.
"Let's just wait and see how the rupiah moves next week when Singapore and Hong Kong players are back in the market again," a dealer with a local private bank said.
"The direction of the rupiah has been dictated largely by Singapore and Hong Kong operators so far," the dealer said.
The rupiah hit an all-time low of 17,000 against the greenback early this month on increasing worries over Indonesia's private sector debt.
Indonesia has a total external debt of US$140 billion as of the end of 1997 with the corporate sector accounting for about $66 billion.
Stock prices on the JSX rose higher with the main price index rising 9.62 points to close at 488.93 from 476.31 the previous day.
Over 282.94 million shares changed hands in the regular market valued at Rp 449.66 billion ($44.96 million) yesterday.
Stock brokers said local investors made massive buys in banking stocks due to the government's guarantee for bank depositors and creditors on their problems.
"Positive sentiment in banking stocks helped the benchmark price index rise on support of the government's recent reforms," a broker with a local brokerage house said.
Elsewhere, most Asia-Pacific stock markets ended trading with modest gains as several major regional bourses were shutdown for the Chinese New Year holiday. (aly)