Rupiah to weaken, stock market to strengthen: Analysts
Rupiah to weaken, stock market to strengthen: Analysts
JAKARTA (JP): The rupiah will remain weak this week owing to
dollar buying by companies paying off debts, while the stock
market is expected to strengthen thanks to the strong buying
desire of traders, analysts say.
Wiwan Wiradjaja, a currency analyst at PT Vickers Ballas
Indonesia, said that the possibility of a dollar-buying spree by
corporations wanting to pay off their debts, which were due to
mature this year, would put pressure on the currency.
"Corporate debt payments to foreign creditors will put the
rupiah under pressure. I estimate the demand for currency will
still be high," Wiwan told The Jakarta Post on Saturday.
"As the rupiah tended to weaken over the past two weeks, I
think the rupiah will hover between Rp 9,000 and Rp 9,200 against
the dollar," he added.
The rupiah closed at Rp 9,075 on Friday compared to Rp 8,860
the week before as state banks bought dollars on behalf of state
oil and gas company Pertamina, which needs cash to pay its debts,
traders said.
The 2002 draft state budget unveiled by President Megawati
Soekarnoputri on Friday and praised by many analysts looks to
have failed to prop up the rupiah as the currency dropped that
day from Rp 9,030 a day earlier.
Wiwan stressed the importance of local enterprises to hammer
out debt restructuring agreements with their creditors to help
ease the pressure on the rupiah.
Slow economic recovery, after the financial crisis struck in
mid 1997, has resulted in the failure of local businesses to
repay most of their foreign debts.
That forced enterprises to seek fresh deals with creditors to
restructure their matured debts.
Under the Frankfurt Agreement in 1998, domestic banks reached
a deal with their lenders that allowed them to extend their debts
until the 1999 fiscal year. Bank Indonesia agreed to guarantee
debt payments.
"Further deals on their debt restructuring scheme would help
ease the pressure on the rupiah," Wiwan said.
In contrast to the weakening trend of the rupiah, stock
analyst Adrian Rusman said that the Jakarta Stock Exchange (JSX)
Composite Index was expected to continue to increase, as it had
over the last two weeks.
The BNI Securities analyst stated that the index would reach
as high as 455 points this week on speculative buying.
On Friday, the index rose to 443.81 from 435.55 the previous
week.
"This increasing trend will continue this week on several
factors," Adrian said on Saturday.
"First, the index has surpassed the resistance level of 433 on
the back of the increase in trading volume, which indicates a
strong buying desire from traders.
"This week, that level of resistance will become the support
level," he said, adding that the index would start to pick up by
Tuesday or Wednesday.
Adrian said other factors that were expected to stimulate
growth in the index would be the recent slide of the rupiah and
the possibility of the central bank easing its tight monetary
policy by lowering the interest of its promissory notes (SBIs).
BI could be forced to cut the SBI rate if the U.S. Federal
Reserve Bank lowers its federal funds' rate, as expected by many
analysts.
The U.S. unemployment rate soared to a four-year high in
August as companies removed 113,000 workers from their payrolls,
the government said on Friday.
Economists were stunned by the weakness in the jobs report and
predicted more Federal Reserve interest rate cuts.
Adrian said the Fed's move to cut its interest rate would
likely be followed by many countries, including Indonesia.
The interest rate on SBIs is currently 17.67 percent. (10)