Rupiah, stocks to remain under pressure: Analysts

Dadan Wijaksana, The Jakarta Post, Jakarta

The local currency and shares will remain under pressure this week amid lingering negative sentiment that has rocked the market over the past several weeks, analysts said.

As regards the rupiah, currency analyst Farial Anwar said that market sentiment would remain bearish on continued concerns over various domestic issues.

"Since there is no good news to counter the bad news, the pressure on the rupiah will likely to continue this week, keeping the rupiah above the Rp 9,000 level," Farial told The Jakarta Post over the weekend.

PT Danareksa Sekuritas analyst Ferry Latuhihin concurred, saying the negative sentiment in the market was such that it was very unlikely the rupiah would strengthen to below Rp 9,000.

"However, it will also not move too far away from that range as Bank Indonesia will step in to intervene," Ferry told the Post.

Last week, the market saw the local currency stumble, breaking through the psychological level of Rp 9,000 against the U.S. dollar to close at Rp 9,100, the lowest in two months.

Aside from unfavorable domestic factors, Farial also said last week's slump in the U.S. stock market, which caused jitters among investors worldwide, would continue to haunt the global market this week.

Wall Street nose-dived following a string of accounting scandals involving big U.S. corporations like Enron, WorldCom and Merck & Co., dragging down most stock markets around the world, including Jakarta.

Foreign investors anxiously sold stocks in Jakarta and bought dollars.

"This has put the rupiah under pressure," Farial said.

The index closed last week at 479.613, down 13.257 points, or 2.7 percent, on the previous week's closing.

Both Farial and Ferry said that domestic problems, particularly concerns over possible political friction at the upcoming Annual Session of the People's Consultative Assembly, had put additional pressure on the rupiah.

"Concerns are running high that political tension will disrupt the country's stability, which thus far been quite good," Ferry added.

The Annual Session, scheduled for Aug. 1 to Aug. 12, will seek to resolve several sensitive issues, including whether the country should adopt a direct presidential election system for the next election.

Negative sentiment caused by the above factors will also weigh heavily on the stock market, according to analysts.

"Uncertainty in stock markets around the world will linger. This will affect our market's performance," Jasso Winarto of Sigma Research Institute told the Post over the weekend.

The index will continue hovering below 470 point, with the 450 level being the next target, he added.

Daily volume last week averaged 368.96 million shares worth Rp 296.6 billion (US$32.9 million) compared to the previous week's 767.44 million shares valued at Rp 535.2 billion.

State-owned telecommunications firm Telkom lost Rp 50 over the week to close at Rp 3,700 while state-owned international call operator Indosat lost Rp 700 to close at Rp 10,300.

Cigarette maker Sampoerna was flat over the week at Rp 4,100 while rival Gudang Garam was down Rp 200 at Rp 9,550.