Rupiah surges, stocks gain ground
JAKARTA (JP): The government's economic reforms, which failed to impress the financial and stock markets at their announcement Thursday, managed to beef up the rupiah and stock prices yesterday.
Currency dealers and stock brokers said a combination of the central bank's intervention and some degree of confidence in the government buoyed market sentiment in the currency and stock markets.
The spot rupiah closed at 8,250/8,350 to the U.S. dollar against an opening of 8,500/8,800 yesterday.
Dealers said the rupiah was still under pressure in the morning as foreign exchange markets remained skeptical on the government's ability to implement economic reforms to deal with the country's monetary crisis.
The rupiah fell to 8,900 in the morning due to groundless rumors of an Indonesian bank defaulting on its foreign obligations, off its high of 8,120 during lunch break.
"Some overseas operators were buying quite a lot of dollars in early trading, which pushed the rupiah down against the dollar," a dealer with a local private bank said.
However, dealers said the rupiah managed to strengthen against the greenback at the close yesterday due to the central bank's intervention through several state banks.
"Some state banks sold a limited amount of dollars in the market," the dealer said.
Even though the rupiah was hovering between 8,000 and 9,000, dealers said the volume of transactions remained thin, implying the market did not reflect a genuine market price.
Dealers said as the rupiah strengthened, financial markets would still closely watch how the reform package would be implemented.
The government announced Thursday a sweeping reform package, arranged by the International Monetary Fund, which included the abolition of special privileges for the controversial national car project, subsidies for fuel and food, and various market distortions, to further strengthen the banking industry.
As the rupiah strengthened, stock prices on the Jakarta Stock Exchange (JSX) rose sharply by 6.9 percent as foreign and local funds returned to stocks with good fundamentals, pushing the benchmark index above 400 points, brokers said.
"There was an unexpected rise in stock prices and I don't understand the direction of the market anymore," Christina Lim of Harita Securities said.
The JSX price index ended 26.67 points higher at 413.92 from 387.24 the previous day.
Over 792.3 million shares changed hands in the regular market valued at Rp 728 billion (US$88.24 million).
"The increase in stock prices shows that the government has started to regain public confidence," head of research at Pentasena Securities Mohammad Syahrial said.
But stock brokers said they were still cautious with the direction of stock prices in the fluctuating market.
Brokers said most big foreign brokerage houses made big buys in most blue chips with strong fundamentals, including state- owned PT Telkom, Indosat, and cigarettemakers HM Sampoerna and Gudang Garam. (aly)
Currencies -- Page 11