Rupiah strengthens, stocks hit low
JAKARTA (JP): The rupiah broke the 11,000 barrier against the U.S. dollar to close firmer at 10,950 in moderate trading on Tuesday, but local stock prices fell 4.8 percent to touch another five-year low, currency dealers and stockbrokers said.
Currency dealers said Malaysia's plan to introduce foreign exchange control measures and limited dollar-selling for the rupiah by the country's state banks had provided more leeway for the rupiah to move ahead Tuesday.
Dealers said the rupiah, which opened at 11,100 in the morning, soared to an intra-day high of 10,750 as a result of Malaysia's new capital control move.
"Malaysia's new move gave a big boost to other currencies in the region, including the rupiah," a dealer with a local private bank said.
Dealers also attributed the strengthening rupiah to a strong Japanese yen, which traded within a range of 137 to 138 against the greenback on Tuesday.
"But on top of that, persistent dollar-selling by state banks helped the rupiah to remain strong," the dealer said.
Dealers said the rupiah could extend its gains as state banks continue to sell dollars for rupiah, possibly acting on behalf of the central bank.
In addition, they said the market perceived that Indonesia could also move the same direction as Malaysia did to peg the rupiah's exchange rate against a major currency to reduce fluctuation and help bring down interest rates.
Such perceptions prompted investors to pull out their short- term investments in Indonesia, especially in equity, and convert them into U.S. dollars.
Stock prices on the Jakarta Stock Exchange (JSX) tumbled 4.8 percent with the main price gauge sliding 16.58 points to close at 325.85, a level not seen in the last five years.
Trading turnover totaled 167.47 million shares changing hands valued at Rp 196.70 billion (US$17.88 million).
The head of institutional sales at Mashill Jaya Securities, Antonio Yongnata, said that Malaysia's move on foreign exchange capital controls to jack up the ringgit's value had triggered panic selling in the regional market.
"Most investors in the region, including Indonesia, are panic selling because they fear that the monetary authority in their respective countries will apply a similar move like what Malaysia did," he said.
He said that most foreign investors continued to dump their stocks, including large-capitalized stocks, in the local market to avoid losses.
"Investors fear that if they put some funds in the market, they will have difficulty getting their money back," he said.
The head of research at Sigma Batara Securities, Fadjar Limin Sutandi, said that the absence of positive news in the hammered local bourse had forced most investors to shun the market.
"There are no fresh leads at all in the market. Consequently, most people continue to sell blindly," he said.
He said the market was still plagued with negative news, like poor first-half corporate results, high interest rates and ongoing political and social uncertainty.
Both Fadjar and Antonio said that political uncertainty would remain a significant factor in driving down stock prices, though some stocks had been oversold.
Most blue-chip stocks fell, with market leader state telecommunications firm PT Telkom sliding Rp 325 to Rp 2,025 on 18.66 million shares changing hands. (aly)