Rupiah, stocks give up gains on Megawati's loss in election

JAKARTA (JP): The rupiah and stocks rallied in morning trade on Wednesday following the withdrawal of incumbent B.J. Habibie from the presidential race, but gave up most of their gains later in the day after Abdurrahman Wahid was elected President.

Securities analysts said Habibie's withdrawal fueled active trading on the Jakarta Stock Exchange (JSX) and in the money market, with investors confident their preferred candidate, Megawati Soekarnoputri, would win the presidency.

At one point in early trading, the JSX index jumped nearly 10 percent while the rupiah surged to 6,960 against the U.S. dollar.

However, the bullish trend reversed in the afternoon after it became clear the presidency would elude Megawati.

Both the rupiah and stock prices plunged after the announcement that Muslim leader Abdurrahman Wahid, popularly known as Gus Dur, defeated Megawati to become the country's fourth president.

"The negative sentiments were not really due to Gus Dur himself, but the lack of information about his economic programs," an equity analyst at ABN Amro Asset Management, Ario W. Adhikari, said.

Ario said that unlike Megawati, Abdurrahman had not outlined his presidential platform to the public prior to Wednesday's election.

"Abdurrahman needs to let the public know what his programs are. Until then the market will just wait and see," Ario said.

Despite the afternoon plummet, the JSX Composite Index gained 0.78 points, or 0.1 percent, to close at 584.42 points. Transaction value on the day was an extraordinarily high Rp 3.1 trillion.

The JSX said Wednesday's trade was the most active in the exchange's history. Trading had to be stopped 10 minutes before the close because the system could not handle all of the transactions.

Gainers marginally outnumbered losers 69 to 64, with 136 stocks unchanged.

Mirroring the JSX, the rupiah climbed as high as 6,960 against the U.S dollar in the morning session, but fell back to close the day at 7,450, a small improvement over its 7,570 close the previous day.

"Investors just feared that Megawati's loss in the presidential election would spark unrest," a currency dealer with a local private bank said.

He said investors increased their rupiah position in morning trade, and turned around and sold the rupiah back to the market to take profits after Abdurrahman won the presidency.

Trade on the rupiah was thin, with a number of banks closing early in anticipation of unrest. The rupiah also fluctuated wildly throughout the day, swinging in value against the dollar in hundreds of rupiah instead of tens of rupiah, another dealer said.

"The rupiah moved quickly; in three to four minutes it swung from 7,000 to 7,450 when the votes for Gus Dur hit 340," the dealer said.

"The market just seemed to follow commands from the MPR building," he said, adding that when Megawati was ahead in the vote count the rupiah strengthened. The MPR is the People's Consultative Assembly.

He said trading on Thursday would depend on developments in the street demonstrations staged by Megawati's supporters following her defeat.

"If things can be brought under control, the rupiah will have a good chance to breach the 7,000 level against the greenback tomorrow (Thursday)," he said.

He said that the future of the market depended on the programs introduced by Gus Dur and who he appointed to his Cabinet.

He added that whoever led the country would face a tough challenge in dealing with Indonesia's huge foreign debts.

"At this stage the market will evaluate how Gus Dur gets around all these problems Indonesia has," he said.

He also said if the unrest persisted the rupiah could fall as low as 9,000 against the dollar, while if the situation was controlled the currency would climb to 6,500 in about one month. (udi)