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)