Rupiah to strengthen next month on bank sales: Central Bank
The Jakarta Post, Jakarta
The central bank has painted a brighter outlook for the rupiah next month, as the local unit is expected to benefit from the planned sale of a number of local banks.
The rupiah closed flat on Friday at 8,440 per U.S. dollar, the same as Thursday's close, but Bank Indonesia governor Burhanuddin Abdullah was optimistic that the estimated capital inflows from the banks sales would make the local currency stronger.
"The (rupiah) outlook for next month is okay, in line with the sale of stakes in our banks," Burhanuddin told reporters, but did not mention the precise predictions.
Burhanuddin was referring to Bank Rakyat Indonesia (BRI) and Bank Lippo, which are slated to go up for sale next month, and Bank Internasional Indonesia (BII), whose sale is now in progress and expected to be concluded next month.
The government is set to sell a 36 percent stake in state- owned BRI, the country's fourth largest bank, through an initial public offering (IPO).
The program is expected to lure plenty of investors, including foreign ones, given its strategic position in the banking sector. Currently, BRI is the country's largest bank in terms of micro- financing with close to 4,000 branches spread out across the country.
As the bank usually does not give huge loans to huge private corporations, BRI generally has a small default risk on its loans. This is expected to become a major attraction for investors, analysts have said.
The sale of BRI's stake at between Rp 700 and Rp 875 per share is expected to generate Rp 3 trillion ($361 million) in proceeds for the government.
Also underpinning the positive sentiment on the rupiah was the sale of a 51 percent stake in BII and a 52 percent stake in Lippo. A number of foreign investors have reportedly submitted their non-binding preliminary bids.
The inflows of foreign capital will boost demand for the rupiah -- as they need to be converted into the local unit for the purchase of the banks. This in turn would strengthen the rupiah.
Bloomberg has quoted Chia Woon Khien, an analyst at Singapore's DBS Bank Ltd. which is a unit of Southeast Asia's largest bank, DBS Group Holdings Ltd., as saying that the banks' divestment program would be in favor of the local currency.
"That will be supportive of the rupiah," she said, adding that it will probably strengthen further to 8,000 per dollar in the next year.
She did not elaborate.
Anton Gunawan, Citibank economist, was also upbeat about the rupiah, saying that it could strengthen to 8,400 next month.
The rupiah has been relatively stable throughout the year, despite various shocks, including the prolonged global economic downturn, the Iraq war and the deadly bomb blasts by terrorists at home.