Rupiah up on plan to cut fuel subsidies
Rupiah up on plan to cut fuel subsidies
Bloomberg, Jakarta
The rupiah rose for a fifth day after the government said it may
increase fuel prices in October to cut energy subsidies.
The plan to reduce subsidies that are threatening efforts to
narrow the budget deficit helped the rupiah rise from a four-
year low reached on Aug. 30. Record crude oil prices have led to
surging demand for dollars, weighing on the currency.
"Sentiment for the rupiah has been recovering," said Tetsuo
Yoshikoshi, market analyst of the Treasury unit in Singapore at
Sumitomo Mitsui Banking Corp., a branch of Japan's third-biggest
lender. "A subsidy cut will reduce the deficit and help decrease
demand for oil."
The rupiah rose 0.8 percent to 9,928 to the dollar as of 5:17
p.m. in Jakarta. The currency may advance to 9,800 by the end of
this month, Yoshikoshi said.
"If we increase by October, the minimum is going to be 5
percent" and fuel prices will be raised gradually to cover costs
within 36 months, State Minister of National Development Planning
Sri Mulyani Indrawati said earlier this week.
Meanwhile, stocks fell for a third day. Bellwether PT
Telekomunikasi Indonesia (Telkom) led the decline after oil
prices surged the most this month, adding to concern the
government may boost fuel prices more than expected to cut its
subsidy bill.
"Oil is at the heart of the nervousness in the market," said
Alvin Pattisahusiwa, who helps manage the equivalent of $287
million at Fortis Investments in Jakarta. "As long as oil's going
up, then those concerns are going to stay."
The Jakarta Composite Index fell 7.72, or 0.7 percent, to
1050.90 at the 4 p.m. close, after earlier rising as much as 0.3
percent. Seven stocks dropped for every four that gained.
The benchmark has slumped 12 percent from a record high on
Aug. 3 as surging oil prices have prompted the government to
consider cutting fuel subsidies to avoid a budgetary crisis.
Indonesia is the only member of OPEC that is a net oil importer.
Telkom, Indonesia's largest phone company, dropped Rp 50, or 1
percent, to Rp 5,000 on concern higher fuel costs will damp
consumer spending and boost operating costs. PT Astra
International, the nation's biggest auto retailer, lost Rp 350,
or 3.3 percent, to Rp 10,300. PT Unilever Indonesia, the local
unit of the world's biggest manufacturer of food and soap,
declined Rp 25, or 0.7 percent, to Rp 3,800.
Elsewhere, PT International Nickel Indonesia (Inco) climbed Rp
400, or 2.7 percent, to Rp 15,000 after analysts at PT Danareksa
Sekuritas said the company's dividend yield will support share
prices. It has a dividend yield of 3.1 percent compared with a
yield of 2 percent for the Morgan Stanley Capital International
Asia-Pacific Index, a regional benchmark.
The government on Sept. 13 asked International Nickel, a unit
of Canada's Inco Ltd., to raise royalty payments to the state by
as much as 2 percent if the miner goes ahead with an expansion
plan, Investor Daily Indonesia said, citing an energy ministry
official.
"The management's decision to agree on the higher royalty
payment for the new project should smooth the process of
obtaining approval," Jakarta-based Danareksa said in a note to
clients on Thursday. Its "attractive dividend yield provides a
cushion for the share price."