Rupiah strengthens as stocks gains ground
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)
Related stories -- Page 10, 11