Rupiah weakens slightly but stocks get stronger

JAKARTA (JP): The rupiah weakened slightly against the U.S. dollar yesterday following some selling from state banks, while the stock market maintained its strength as a result of investors' continuing to buy stocks in certain state-owned firms.

The rupiah slid to 14,700 against the U.S. dollar in the afternoon from 14,500 the morning, but stock prices on the Jakarta Stock Exchange (JSX) gained 2.8 percent, currency dealers and stockbrokers said.

Currency dealers said trading in the local foreign exchange market was still very slow, but some state banks sold rupiah for the dollar, which helped to push the rupiah down slightly.

"I heard that some state banks bought dollars today. But so far it is not clear what they were buying for," a dealer with a local bank said.

"I think it was this dollar buying which pushed the rupiah down today because in the morning the currency was still trading at 14,500."

The rupiah closed at Rp 14,675/14,6775 in Jakarta yesterday. The currency closed at Rp 14,500 last Friday, the last day of trading before the holiday weekend.

Dealers said dollar demand should have dropped sharply because most local commercial banks had settled their interbank debts and trade finance arrears and the Frankfurt debt agreement to reschedule $80 billion in corporate debts had become effective on July 1.

A dealer with another local bank said secessionist demonstrations and violence in Irian Jaya had somehow influenced rupiah trading.

"The market was quite concerned with that happening, fearing that it could spread into other provinces," he said.

Dealers said the market was hoping for dollar supplies from multilateral financial agencies to start flowing in after the World Bank approved a US$1 billion loan to Indonesia and said an additional $6 billion from international donors should be ready soon.

In a move to support the rupiah, Bank Indonesia maintained its high interest rate policy by offering a three percentage point premium above other corresponding promissory notes.

Dealers said Bank Indonesia was offering overnight interest rates of 51 percent, interest rates of 57 percent on one week deposits, 59 percent on two week deposits, 61 percent on one month deposits, 56 percent on two month deposits, 47 percent on three month deposits, 37 percent on six month deposits, and 39 percent on 12 month deposits.

The rates remained unchanged from Friday.

The weakening rupiah and high interest rates did not deter investors from trading on the local bourse, which gained 2.8 percent.

The JSX Composite Index rose 13.4 points to close at 483.945, with a total trading turnover of 412 million shares valued at Rp 522.25 billion (US$35.5 million).

Mashill Jaya Securities' head of research, Edhi S. Widjojo, said the gain was fueled by the frantic buying of listed state- owned firms, especially gold and nickel mining company PT Aneka Tambang and tin mining company PT Tambang Timah, following the sudden rise in the price of shares in state cement maker PT Semen Gresik.

"I think investors do not want to miss the opportunity to make a huge gain after seeing what happened to shares in Semen Gresik. Investors are now running after Tambang Timah and Aneka Tambang," he said.

He said Aneka Tambang and Tambang Timah were both very attractive to foreign investors, adding that their price earning ratio was still quite low compared to Semen Gresik.

Shares in Tambang Timah rose Rp 475 to close at Rp 7,525, Aneka Tambang shares soared Rp 225 to Rp 2,050, and shares in Semen Gresik shot up Rp 3,200 to Rp 12,350.

Stockbrokers said both local and foreign investors were chasing shares in Semen Gresik once they resumed trading on the JSX from the start of the afternoon session.

Trading of shares in Semen Gresik was suspended last Wednesday at the company's request when talks on the planned sale of the government's stake in the company reached a critical phase.

The government said on Friday that Mexico's Cementos Mexicanos SA de CV (Cemex) had won the first round of bidding for the 35 percent government stake in the company with a bid of $1.38 per share.

Cemex said it would purchase a further 16 percent stake in Semen Gresik from other shareholders through a tender offer to get a controlling stake.

The government said yesterday that it would sell another 5 percent if Cemex failed to buy the required 16 percent stake from other shareholders. (rid)