Rupiah weakens as stock prices gain ground
JAKARTA (JP): The rupiah weakened against the U.S. dollar yesterday as stock prices on the Jakarta Stock Exchange (JSX) rose 2.9 percent.
"Yesterday (Monday), the rupiah resisted regional weaknesses. But today (yesterday) it didn't. Positive news disseminated by the government failed to improve market sentiment," one local bank dealer said.
Dealers said the rupiah, which managed to go up to 5,550 against the dollar during lunch break from an early low of 5,725 in the morning, closed weaker at 5,600/5,800.
They said the rupiah was dragged down by the fall of the South Korean won, a downgrade in Asian debt ratings and the dollar liquidity squeeze.
Another dealer said the market was confused by the government's plan to issue promissory notes denominated in dollars.
"Is that part of the IMF- (International Monetary Fund) supported program or not. We don't know what's really going on as available information is yet unclear," the dealer said.
The weakening rupiah, however, did not affect stock prices at the JSX as the main price gauge rose 2.9 percent on strong buying of most second-line stocks yesterday.
The JSX composite index closed 11.18 points higher to 397.03, with total turnover of 593.04 million shares valued at Rp 455.09 billion (US$82.7 million).
Stock brokers said the rise of the main index was marred by the suspension of most second-line stocks when their prices rose by 20 percent yesterday.
Among suspended stocks were Bakrie Land Development, Lippoland, Sierad Produce, Royal Sentul Highland, Jaya Real Property, Maharani Intifinance, Summarecon Agung, Duta Anggada Realty, Bhuwanatala Indah Permai, Panasia Filament Inti, Sarasa Nugraha, Sekar Laut and Igar Jaya.
An institutional equity broker with Trimegah Securities said most companies bought their own stocks to make a good closing price by the end of this year.
"There is a lot of window-dressing today (yesterday)," the broker said.
"Some corporations want to make prices of their stocks look good so their annual financial report looks better," the broker said.
The head of research at Mashill Jaya Securities, Tjandra Kartika, said the outlook for the JSX would still be gloomy, especially after the downgrade of Indonesia's debt by Standard & Poor's and Moody's Investors Service.
"This downgrade means that Indonesia will be considered a negative investment spot by most institutional investors in the United States, like pension funds and insurance companies," he said.
Meanwhile, the head of research at Pentasena Securities, Mohammad Syahrial, said the market had anticipated such a downgrade long before the two agencies announced their new ratings.
"The overall mood is quite good as the market seems to feel relieved with the government's moves to set up a special team to solve private sector debt," he said.
President Soeharto set up a task force Monday, led by former cabinet minister Radius Prawiro, to help the private sector seek rollover facilities from foreign creditors.
But Syahrial said the market was still waiting for more constructive and direct moves on the part of the government to eliminate various distortions in the economy. (aly/rid)