Rupiah weakens, stocks strengthen

JAKARTA (JP): The rupiah eased again yesterday while the stock market continued to make gains, currency dealers and stockbrokers said.

Dealers said the rupiah weakening was due to the Malaysian ringgit's drastic downfall yesterday, continuing strong corporate demand for U.S. dollar and ample liquidity.

Spot rupiah recovered to 3,018/20 against the dollar at midday from an early low of 3,033 but weakened in the afternoon to close at 3,027/32.

Futures contracts for today and tomorrow closed at 3,025/30 and 3,024/30, respectively.

"The ringgit, strong local demand for dollar and sufficient liquidity forced the rupiah to trail down today," one local bank dealer said.

He said liquidity supply improved further, with the maturing central bank short-term SBI papers totaling 1.24 trillion (US$414 million).

Overnight rupiah quoted among state banks and large sound banks were stable at 50 basis points above the SBI rate of 15 percent.

The dealer said swap rates continued to ease gradually on the back of ample liquidity and the lower interest rate trend.

Overnight swap was at 0.30/0.35 and tom/next at 0.7/0.9.

One-week swap was at 4.80/5.25, one-month at 26/28, two at 55/60, three at 80/95, six at 185/200 and one-year at 370/385 points.

The dealer said such a slight easing in liquidity had triggered increased dollar buying by local corporate companies.

"In this situation, I don't think the central bank would cut SBI rates as it could knock down the rupiah," he said.

An easing liquidity and lower interest rate trend sent a positive sentiment to the stock market, stockbrokers said.

Share prices on the Jakarta Stock Exchange gained 1.0 percent yesterday, with the composite index rising 5.574 points to close at 559.220.

Turnover totaled 324.6 million shares valued at Rp 436.52 billion (US$144 million).

BZW Niaga Securities' head of trading Adnan Tan said several foreign investors, after staying on the sidelines for some time, had started buying local selected stocks.

"What we are seeing is that more and more investors are starting to feel comfortable with declining interest rates and a relatively stable rupiah," Tan said.

He said institutional investors helped drive up some big capitalized stocks like telecommunications firm Telkom, cigarette maker Gudang Garam and Bank Internasional Indonesia.

"It's a good sign that they started to buy Indonesian stocks using cash... But I think this is only in the short-term," Tan said.

He warned that the medium-term outlook was still worrisome as the weighting of most Indonesian stocks was not improving.

Gudang Garam rose Rp 150 to Rp 9,650 while competitor Sampoerna was unchanged at Rp 6,875.

Bank Internasional Indonesia gained Rp 50 to close at Rp 1,025.

Telkom helped lead the rise in the index, up Rp 50 rupiah at 3,625 while international telecommunications company Indosat climbed Rp 50 to Rp 8,125. (rid)