Rupiah to strengthen next month on bank sales: Central Bank

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.