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