Rupiah to strengthen, stock market to weaken

Zakki Hakim, The Jakarta Post, Jakarta

The rupiah is expected to continue appreciating against the U.S. dollar this week, a currency analyst has said.

Farial Anwar of Currency Investment Management told The Jakarta Post on Sunday that people would need more rupiah to purchase government bonds and the assets shortly to be sold by the Indonesian Bank Restructuring Agency (IBRA).

IBRA is planning to sell a majority stake in Bank Danamon soon.

The rupiah last week ended at a nine-month high of Rp 8,725 per dollar.

"We expect a firmer rupiah this week," Farial said.

The upcoming 2004 general election, and the threat of wars in Aceh and in Syria would not affect the country's currency too much as this year the market was maturer than in previous years, he said.

"As we have seen over the past weeks, the market's relatively calm reaction to the Iraq war and the outbreak of Severe Acute Respiratory Syndrome (SARS) proves that it is more mature now," Farial said.

But he said that the appreciating trend could be limited by negative sentiment on the stock market, which might force people to seek dollar-based investment alternatives.

Zulfikar, an analyst with securities firm PT Mandiri Sekuritas, told the Post that the Jakarta Stock Exchange composite index would likely drop this week on profit-taking.

Last week, the index ended 1.2 percent higher at 443.85 compared to the previous week's close of 438.55 on the back of positive sentiment resulting from the end of the Iraq war.

But he said that bluechip stocks were now relatively expensive, thus putting pressure on the stock market.

"We are expecting a drop in the index this week because the prices of blue chip stocks are high enough for investors to sell," he said.

After gaining profits on the stock market, most investors will switch their investments to other alternatives, such as bond- based mutual funds, which promise more certainty and higher yields due to their tax-free status, he said.