Rupiah to remain flat this week, analysts say

A'an Suryana, The Jakarta Post, Jakarta

The rupiah and local stocks are expected to remain flat this week amid the absence of fresh leads and a relatively stable political condition, according to analysts.

Currency Management Group analyst Farial Anwar, however, said that if Wall Street plunged again, it could create pressure on the local currency.

Farial predicted the rupiah would be stable this week, hovering around at Rp 8,800 to Rp 9,000 per U.S. dollar.

"The rupiah is entering a consolidation period," said Farial.

The Rupiah closed at Rp 8,830 on Friday.

The market didn't react to the announcement of the 2003 state budget draft and the narrower fiscal deficit of 1.3 percent of gross domestic product from 2.5 of GDP this year.

The IMF praised the budget draft as "a sound budget which should help reinforce macroeconomic stability."

Farial said that the government's 2003 state budget draft, unveiled by President Megawati Soekarnoputri on Friday, did not lift sentiment in the rupiah because market players doubted whether the government could meet the 5 percent economic growth target as stated in the budget proposal.

"There will be no more big events this week and sometimes to come, therefore the rupiah would likely be more stable," said an analyst at a foreign currency firm.

Farial, however, warned that the rupiah could be under pressure if stocks on Wall Street plunged again, which would cause stock investors here to also unload some of their stocks and exchange their rupiah funds with dollars.

Stock analysts said that the local equity market would likely remain flat this week unless the U.S. markets plunged further.

"The selling of shares in PT Telkom on Friday had managed to temporarily pull up the stock index. But, market players are still cautious over what will happen on Wall Street," said stock analyst Edi S. Widjojo.

Indonesian shares ended higher on Friday, led by buying in the Telkom shares. The good performance of Telkom shares was mainly due to latest financial report by the company, which reported strong first half-earnings.

The Jakarta Stock Exchange composite index closed at 450.98 Friday.

Edi predicted that the share index would hover around 445 to 455 this week.

Separately, Hengky Sumarli from Kim Eng Securities, said that market players should turn their eyes to consumer product companies, as the country's economic growth would still be mainly driven by consumer spending.

Shares at cigarette giants PT HM Sampoerna and PT Gudang Garam, should up this week, Hengky said.