Rupiah strengthens as stocks gains ground

Wed, 14 Jan 1998, 00:00 WIB | Source: JP

JAKARTA (JP): The rupiah continued to strengthen against the
American dollar yesterday on a positive market reaction to the
talks between International Monetary Fund (IMF) officials and the
Indonesian government on economic reforms, currency dealers said.

The strengthening rupiah sent positive news to share prices on
the Jakarta Stock Exchange (JSX) with the main price index rising
by around 9 percent on major buying on big cap stocks by local
investors.

Currency dealers said that the rupiah was beefed up by some
aggressive dollar unloading by overseas operators who anticipated
a stronger rupiah after the conclusion of the talks with IMF and
special envoys from the United States and the Singapore prime
minister.

They said spot rupiah closed higher at 8,150/8,300 yesterday
against the opening of 9,000/9,500 in the morning trading
session.

"But trading activity remained thin with most local corporates
tracking sideways from buying dollars at this current high
level," a chief dealer with a local private bank said.

Dealers said that the rupiah's free fall since last week,
which saw the rupiah to fall to as low as 10,000 on Thursday,
seemed to have abated after the IMF and world leaders stepped in
to counsel President Soeharto, dealers said.

"Talks between the world leaders and President Soeharto have
set most currencies in the region to strengthen against the
American greenback yesterday," the dealer said.

But most dealers expected the financial market to remain quiet
until the government announces a new package of drastic measures
to restore market confidence in the country's battered economy.

Minister of Finance Mar'ie Muhammad said yesterday that the
outcome of discussions with senior IMF officials and President
Soeharto on the country's economic reforms would be announced on
Thursday.

Analysts said if the government announced some concrete plans
as to how reform measures would be implemented, there could be
some support for the rupiah to be stronger.

Dealers said liquidity was slightly tight, but short-end swaps
were trapped below par on continued demand for dollars by
selective desperate banks.

They said banks were cutting their lines on worries of
deepening difficulties in the banking sector following a plunge
of the rupiah of more than 70 percent against the dollar.

As the rupiah recovered, share prices on the JSX rose sharply
with the benchmark indicator rising 31.90 points to close at
382.13 points from 350.23 the previous day.

Brokers said that total turnover on the regular market was
594.39 million shares valued at Rp 744.34 billion (US$93.04
million).

An institutional broker with Trimegah Securities said that
most local investors made big buying on blue chips stocks
following foreign investors' big buying the previous day.

"High expectations on a positive outcome from the talks
between the Indonesian government and IMF officials really
boosted the domestic investors' sentiment," Trimegah's broker
said.

The broker said some domestic investors were happy to see the
regional markets' strong performance and also expected some good
news from the ongoing talks between the government and the IMF
team.

"While some are still in a wait and see attitude, several
others have anticipated a positive result from the current
negotiations," the broker said.

A stock analyst with a local securities house said that though
the overall sentiment in the stock market remained dull, most
investors were very positive on the current IMF-Indonesia
talks.

"If the results are positive, we will see rapid progress in
the coming months. If not, we should be ready to go back to where
we started a few days ago," the analyst said.

Head of research of Sigma Batara Fadjar Limin Sutandi said
that stock prices on the JSX would pick up strongly if the
government came up with concrete and transparent political and
economic reforms to restore the public's confidence in the
economy.

"Without political and economic reforms our stock market will
likely weaken again in the coming weeks to push down the price
index to as low as 200," he said. (aly)