Shares down for sixth day on weak rupiah worries

Shares down for sixth day on weak rupiah worries

Dow Jones, Jakarta

Indonesian shares ended lower for the sixth consecutive session on Friday as the falling rupiah is expected to force the central bank to increase its key interest rate, hurting efforts to revive the nation's economy, dealers said.

"We are trapped in a situation where we want the rupiah to rebound, but we can't have the interest rate rising (to help the rupiah)," said an analyst with Kuo Capital Securities.

He added that investors continued to consolidate their positions and "they were preparing for the worst."

The Jakarta Stock Exchange's Composite Index fell 1.1 percent, or 12.346 points, to 1087.953, up from its intraday low of 1081.724.

Decliners led gainers 110 to 25, with 51 stocks unchanged. Volume rose to rose to 1.76 billion shares valued at Rp 1.8 trillion, compared with 931 million shares valued at Rp 1.1 trillion on Tuesday. The market was closed on Wednesday for the Independence Day.

A high interest rate could reduce net interest margins and increase the cost of funds for banks, while the weaker rupiah could push up the debt burden of many companies and raise cost of imported raw materials.

Bank and consumer blue chips were the hardest hit by the high interest rate and the rupiah fluctuation.

Bank Mandiri, the nation's largest lender by assets, fell 1.9 percent to Rp 1,560; Bank Central Asia, the second-largest lender, lost 3.6 percent to Rp 3,325; and Bank Negara Indonesia, the third-largest lender, ended 1.3 percent lower at Rp 1,500.

Analysts attributed selling to expectations that the banks will post lower 2005 net profit due to the high interest rate and higher taxes.

Indonesian banks -- which have been exempt from paying taxes since the 1997-1998 financial crisis -- have to pay 30 percent tax on their gross profits from this year.

The interest rate factor also continued to hit automotive company Astra International on expectations of lower 2005 car sales as people may delay their plans to buy cars through bank loans. Astra lost 3.7 percent to Rp 10,300.

Meanwhile, companies with sizable dollar debt like food maker Indofood Sukses Makmur and cement maker Indocement Tunggal Prakarsa ended lower due to the weaker rupiah. Indofood ended down 4.2 percent to Rp 910 and Indocement dropped 3.1 percent to Rp 3,175.

Bellwether Telekomunikasi Indonesia bucked the trend, rising 1 percent to Rp 5,050 on a rebound after falls in the previous six sessions.

Dealers said they expect Indonesian shares to trade flat to slightly higher on bargain hunting after falls in the previous six sessions.