Shares end lower on weak rupiah, bird flu

Shares end lower on weak rupiah, bird flu

Dow Jones, Jakarta

Indonesian shares ended lower for the second consecutive session on Wednesday, hit by the rupiah's weakness against the U.S. dollar and lingering concerns over the outbreak of bird flu in the capital, dealers said.

The deadly virus, which has killed at least four people in Indonesia, could quickly turn into an epidemic, Minister of Health Siti Fadilah Supari warned on Wednesday, as two children suspected of having the virus died.

The government scrambled to calm public fears, announcing plans for mass culls of chickens in infected areas and firing the country's chief of animal health control for allegedly failing to control the bird flu outbreak.

"If the government fails to prevent the virus from spreading, it may hurt investment in the country," an analyst with a local securities firm said.

The Jakarta Stock Exchange Composite index ended down 1.1 percent, or 11.535 points, at 1044.056.

Decliners led gainers 86 to 28, with 59 stocks unchanged.

Volume was 1.1 billion shares valued at Rp 1.1 trillion, compared with 932 million shares valued at Rp 1 trillion on Tuesday.

The dollar was trading higher at Rp 9,215, compared with its previous close of Rp 9,195, due to the dollar's rise after the U.S.'s Federal Open Markets Committee increased interest rates.

Analysts said the weaker rupiah could hurt purchasing power and push up costs of debt services for many Indonesian companies that have sizable dollar debt.

News that Indonesia's foreign exchange reserves declined to US$30.24 billion as of Sept. 15 from $31.15 billion a week earlier gave the market an excuse to buy the dollar.

"Declining foreign exchange reserves will reduce Bank Indonesia's power to intervene in the market to defend the rupiah if it's under selling pressure," a dealer with a U.S. bank in Jakarta said.

Leading decliners, automotive company Astra International dropped 4 percent to Rp 9,500 on worries that it will book lower 2005 car sales due to consumers' weakened purchasing power.

Dealers said investors also continued to sell their shares in banks on expectations of poor 2005 earnings due to high interest rates.

Bank Danamon fell 2.4 percent to Rp 4,025, Bank Mandiri lost 1.4 percent to Rp 1,370 and Bank Rakyat Indonesia declined 1 percent to Rp 2,600.

Dealers said news that the government sold its 5.02 percent stake in Bank Central Asia at a premium did not support the market because it had already been factored in. The government sold BCA shares at Rp 3,550, compared with its Tuesday close of Rp 3,475. BCA was suspended from trading on Wednesday due to the sale process.

Later this month, Indonesia's third largest mobile telephone operator, Excelcomindo Pratama, will hold a $285 million initial public offering which is expected to spark foreign investors' interest, resulting in increased capital flows which would boost the rupiah.

Bucking the trend, cigarette maker Gudang Garam rose 5.7 percent to Rp 11,200 on expectations the company will soon raise product prices ahead of fuel prices increases early next month.

Dealers said they expect shares to trade slightly higher on Thursday on bargain-hunting after declines over the previous two sessions.