Rupiah weakens further, stock prices tumble

Rupiah weakens further, stock prices tumble

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
tumbled by 2.6 percent yesterday as the rupiah continued losing
ground.

Securities analysts said the JSX Composite Index lost 17.26
points or 2.6 percent to close at 658.17, with 256.15 million
shares worth Rp 456.48 billion (US$176.24 million) changing hands
on the regular market.

Foreign exchange dealers, meanwhile, said the rupiah lost
further to close at 2,612/2,620 on the spot market from
2,608/2,613 at the opening due to spillover from the drop in the
Malaysian ringgit.

The ringgit extended its free-fall against the dollar
yesterday, hitting a 42-month low on sales from offshore
investors.

Last week the Composite Index, the main price gauge on the
JSX, fell 6.4 percent following the monetary authority's move to
tighten the rupiah liquidity following speculative attacks on the
currency.

Analysts said the weakening Thai baht, along with Malaysian
ringgit and the Philippine peso, would continue to have a domino
effect on the rupiah.

As a result, they said, most investors prompted a further sell
off in the local stock exchange.

"Investors are still very cautious over currency turbulence in
the regional market," Asian Development Securities' sales
director Naotake Ikeda said.

One local foreign exchange bank chief treasurer warned that
regional currencies would continue to be volatile for some time
and speculation on the rupiah could become more imminent.

"After taking profit from the Malaysian ringgit, they
(speculators) may then target the rupiah because currently this
currency is more lucrative than the Thai baht and the Philippines
peso," he said.

He said the rupiah would remain in the downward trend and it
would be difficult for the currency to strengthen from below
2,600 as before.

"Amid the incessant onslaught on ringgit, we can only keep
ourselves afloat. We don't have enough energy to fight the
speculators," he said.

"In this current situation, we better keep a long position on
the dollar," he added.

Bank Indonesia, the central bank, yesterday maintained its
policy to keep rupiah expensive to discourage dollar buying. The
central bank also still refused to buy the short-term money
market certificates (SBPUs) from banks to ensure rupiah liquidity
remained tight.

The central bank kept overnight rates for Bank Indonesia
Certificates (SBI) at 14 percent, two-to-four day at 15.0
percent, one-week at 9.5 percent, two-week at 10.0, one-month at
10.625, three at 10.5, six at 11.125 and one-year at 11.75
percent.

But dealers said the rupiah supply was adequate yesterday
after state banks entered the interbank market. This effectively
pushed down longer-term rates in the interbank market. The one-
month interbank rate was checked at 16.0/17.0 percent while
three-month was at 17.0/17.5 percent as compared to more than 25
percent early last week.

Stock analysts said concerns over possible increasing banking
interest rates were behind the fall in share prices.

They said the future of the rupiah's exchange rate against the
dollar and domestic interest rates would determine the local
stock market's fate.

And the direction of regional currencies would also govern
regional stock markets, they said.

Head of the research division at Socgen-Crosby, Goei Siauw
Hong, said the market was still unconvinced by international
efforts to help stabilize the Thai baht.

"Investors are still watching where the market is leading...
most of them made a sell-off yesterday," he said.

Most big capitalized stocks fell yesterday on the JSX with PT
Telkom losing Rp 175 to Rp 3,675 and Indosat declining Rp 275 to
Rp 7,150.

Cigarette producer Gudang Garam was down Rp 225 to Rp 8,625
while its rival Sampoerna shed Rp 75 to Rp 8,250.

Most banking stocks closed lower yesterday with
Bank Internasional Indonesia rising by Rp 50 to Rp 1,625, Bank
Negara Indonesia down by Rp 25 to Rp 1,400, Bank Dagang Negara
Indonesia (BDNI) unchanged at Rp 1,100 and Lippo bank down by Rp
25 to Rp 2,550. (aly/rid)

Editorial -- Page 4

Ringgit -- Page 11