Rupiah, stocks to be flat this week

The Jakarta Post, Jakarta

The rupiah is likely to maintain the familiar range of between Rp 9,250 and Rp 9,350 per U.S. dollar this week as investors continue to maintain a positive view on the country's economic outlook, analysts predict.

Ferry Latuhihin, currency and stock market analyst at PT Danareksa Securities, said that although overall sentiment in the local unit remains positive, the absence of market stimulus would limit the rupiah's upward movement.

"Short-term equilibrium, that's the right term for the rupiah. It would continue to hover at a range of Rp 9,250 to Rp 9,350 for this week," Ferry told The Jakarta Post over the weekend.

The local currency has been moving at that level for the past couple of weeks, despite the lack of positive news.

Last week, the rupiah closed a bit higher in four-day trading at Rp 9,290 against the dollar, compared to Rp 9,310 the week before.

After appreciating sharply against the American greenback since January, thanks to increasing investor confidence in the country, concerns have been rife that profit taking, coupled with the absence of market stimulus, would eventually stall the rupiah's current ground on the dollar.

Since early this year, the government has succeeded in creating a positive sentiment among market players by successfully achieving a number of economic reform targets.

Positive news which has been buoying the market includes the successful sale of Bank Central Asia, a $5.4 billion debt rescheduling deal with the Paris Club of creditor nations, and the disbursement of the International Monetary Fund $340 million loan tranche.

Analysts say that investors were now waiting for the government's next asset sale and privatization program. If these programs are implemented successfully, the rupiah will get another boost.

"Confidence in the rupiah will remain strong on a better outlook for economic prospects in the country," said a dealer at a foreign-based brokerage over the weekend.

He said that the market was waiting for good results from the sale of government shares in Bank Niaga, and state-owned telecommunication firm PT Indosat.

The government is planning to sell a 51 percent stake in mid- sized Bank Niaga, and 15 percent in Indosat. The asset sales are expected to be completed in June.

Other banks planned for sale this year include the giant state-owned Bank Mandiri and nationalized Bank Danamon.

The inflow of foreign funds to buy local assets would contribute positively to the exchange rate of the rupiah, analysts said.

Turning to the stock market, a dealer expects the Jakarta Composite Index to remain flat throughout this week as players apply a wait-and-see stance.

"Trading would remain active, but I think the index movement would not be far from last week's," a stock dealer at a local bank predicted.

The Jakarta Composite Index closed the week at 0.178 points, or 0.03 percent lower over the previous Friday at 543.91.

Ferry concurred, saying: "Day to day fluctuation is likely to happen, but overall it would not be far from last week, the index still has a good chance of moving upward."

Daily volume averaged 956.375 million shares valued at Rp 492.91 billion ($53.08 million) compared to the previous week's 873.03 million shares worth Rp 464.64 billion.

Shares in state-owned telecommunication firm PT Telkom closed the week flat at Rp 4,275. Cigarette maker Sampoerna lost Rp 200 over the week at Rp 4,450 while rival Gudang Garam also dropped Rp 200 to Rp 11,550.