Rupiah, stocks gain ground on private debt effect

Rupiah, stocks gain ground on private debt effect

JAKARTA (JP): Indonesian markets gained ground yesterday with
the rupiah improving to 14,700 against the U.S. dollar and stock
prices rising 3.4 percent as private debt arrangements agreed in
Frankfurt earlier last month came into affect today.

Currency dealers said the improving Japanese yen, at 140
against the U.S. dollar, also contributed to the strengthening of
the rupiah.

A dealer with a local private bank said the market anticipated
that the rupiah would continue to improve in line with the
settlement of the private debt hangover.

He said the market was positive with the establishment of the
Indonesian Debt Restructuring Agency (INDRA) which would start
working today to settle huge private debts.

"Market sentiment is positive today, especially with INDRA. We
expect the rupiah will strengthen to a more reasonable level,
possibly the level foreseen by the IMF, provided that the
government can ensure political stability," the dealer said.

The rupiah ended at 14,600/850 to the dollar, off its lows of
15,100 to the greenback earlier yesterday. It closed at 14,850 on
Monday.

The International Monetary Fund and the government have
projected that the rupiah will improve to 10,000 to the dollar at
the end of this year.

Stock prices on the Jakarta Stock Exchange (JSX) tracked the
strengthening of the rupiah, with the JSX Composite Index rising
14.689 points to close at 445.920.

Most large-cap stocks gained ground yesterday, with heavy
weight state-owned telecommunications firm PT Telkom rising Rp
125 to Rp 4,175.

State-owned satellite operator PT Indosat also climbed Rp 750
to close at Rp 17,200, cigarette maker PT Gudang Garam rose Rp
400 to Rp 8,700.

Stockbrokers said the rising benchmark index was also
supported by domestic investors who hunted stocks of companies
which promised to distribute dividends from last year's profits.

Analysts said improving regional markets, spurred by the
improving yen and market expectations over Indonesia's private
debt settlement had especially boosted sentiment.

Pentasena Arthasentosa Securities' head of research Mohammad
Syahrial said yesterday's increase in the stock index was
instigated by market speculation on possible further
strengthening of the rupiah following moves from INDRA.

"It is just a normal scene. When you have positive news, in
this case about INDRA, you will see people speculating on stocks
to get some gains," Syahrial said.

INDRA, envisaged by an agreement between Indonesian corporate
debtors and their foreign creditors in Frankfurt earlier last
month, will start working today to help restructure private
debts.

INDRA will provide exchange rate risk protection and assurance
on the availability of foreign exchange to private debtors that
agree with their creditors to restructure their external debt for
a period of eight years, with three years grace during which no
principle will be payable.

However, Syahrial warned that the good news would soon die
down and uncertainties would continue to blanket the market. In
that situation, the bearish sentiment would return.

"This bullish situation will be short-lived. The market
concerns are still there as to whether the government can
accomplish all of its political agenda," he said. (rid)