Rupiah strengthens to 7,400 but stock exchange loses steam

JAKARTA (JP): The rupiah closed firmer at 7,400 against the U.S. dollar in very light trading on Tuesday, but stock prices fell 0.1 percent on profit taking, currency dealers and stock brokers said.

Currency dealers attributed the firm rupiah to bullishness in the region's currency markets and to a foreign investment house in the Singapore market which sold a large amount of dollars for the rupiah.

Dealers said that the rupiah, which opened at 7,500, climbed to the 7,400 level in late trading following the dollar selling by the investment firm in Singapore.

"We are a bit surprised to see such a foreign investment house selling dollars for the rupiah," a chief dealer with a joint venture bank in Jakarta said.

Dealers suspected that the investment firm sold the dollars for the rupiah after it aggressively purchased the greenback when the financial crisis hit Indonesia in August last year.

Dealers said, however, that trading activities in the currency market had significantly dropped, as most market participants who were active in moving the rupiah, had stayed away from the currency market ahead of the year-end holidays.

Unlike previous days which saw certain state banks selling dollars for rupiah, Tuesday's market saw no such activity, dealers said.

But currency dealers said that commercial dollar demands were expected to rise in the coming days as certain companies would feel comfortable purchasing the dollar now that it has broken below the 7,500 level.

"The year-end demand for the dollar might push the rupiah back over the 7,500 level," the dealer said.

Dealers said political and social instability in Indonesia, where antigovernment protests continued in the capital, failed to affect market sentiment in the currency market.

"Unlike previous days, political instability is no longer a major factor in moving the rupiah," the dealer said.

Unlike the rupiah, share prices in the local stock market lost steam, closing 0.1 percent lower on Tuesday as profit taking on several blue chip stocks weighed down market sentiment.

The Jakarta Stock Exchange Composite Index fell 0.55 points to 398.90, with 267.54 million shares changing hands at a total value of Rp 257.76 billion (US$35.10 million).

Decliners outnumbered advancers by 56 to 41, with 91 stocks remaining unchanged.

Stock brokers attributed the slight fall in share prices to profit taking by certain foreign investors on the gains they made earlier this week.

"Massive profit taking on certain blue chips was capped by the rise in PT Telkom," Vonny Juwono, an institutional sales broker with Trimegah Securindolestari said.

Head of research at Mashill Jaya Securities, Edhi Widjojo, said that the absence of positive leads in the battered local market, coupled with persistent political and economic uncertainty at home, had discouraged foreign investors from entering the market.

"There is no single factor at this point in time that can attract foreign funds into the local bourse," he said.

Trimegah's Vonny, however, said that certain foreign brokerage firms, such as Credit Lyonnais Capital Indonesia, SBC Warburg and Danareksa Sekuritas, continued to place buy orders in the local bourse on Tuesday.

While other securities firms like ABN Amro, ING Barings Securities and Jardine Fleming, which placed massive buy orders in previous days, unloaded their portfolios in profit taking on Tuesday.

Share prices of state-telecommunication firm PT Telkom rose by Rp 100 to Rp 2,975, with 21.43 million shares changing hands, and mining firm PT Tambang Timah rose by Rp 75 to Rp 6,025, with 290,000 shares changing hands. (aly)