Steady rupiah to prop up stock market: Analysts

The Jakarta Post, Jakarta

Analysts expect the rupiah to remain flat against the U.S. dollar in the coming week due to a lack of sentiment.

This steady outlook for the rupiah should help the local stock market remain in positive territory as undervalued telecommunications and banking shares rebound, according to the analysts.

"I'm seeing the rupiah continue unchanged from last week, staying somewhere between Rp 9,400 and Rp 9,500 to the dollar," currency analyst Farial Anwar told The Jakarta Post on Sunday.

He said the local currency was unlikely to get any stronger than Rp 9,400 because there were no imminent leads for the rupiah.

On the other hand, despite a recent strengthening of the U.S. greenback against other major currencies, Farial believes the rupiah can withstand the pressure, particularly with the support of the central bank.

"Bank Indonesia will do everything it can to keep the rupiah above the Rp 9,500 level," he said.

The rupiah closed trading at Rp 9,448 to the dollar last Friday, down slightly from Thursday's close of Rp 9,445 as the dollar gained against the Japanese yen.

The local currency gained slightly from its Rp 9,486 closing the previous week, on suspected dollar-selling by U.S. cigarette giant Philip Morris to finance its acquisition of local cigarette producer HM Sampoerna.

The central bank said it would continue to raise its benchmark interest rate for the remainder of the year to stem inflation, after increasing its one-month SBI rate to 7.91 percent last week.

On the stock market, analyst David Ferdinandus of Anugerah Indah Securities was quoted by Bloomberg as saying that investors would likely begin buying shares of state-controlled telecommunications firm PT Telkom ahead of the publicly listed firm's annual shareholders meeting next month.

"Investors may be keen to accumulate Telkom ahead of its dividend announcement," he said.

Other analysts expect the market to trade higher on follow- through buying of Telkom shares.

Investors will also continue buying back shares in banks that will pay attractive dividends, they said, particularly Bank Mandiri and Bank Rakyat Indonesia.

Trading some 1.21 billion shares worth Rp 863 billion (US$90.8 million), the Jakarta Stock Exchange Composite Index closed at 1,048.11 points last Friday, up 2.65 points from the previous trading day.

Over the week, however, the index shed 11.16 points or 1.05 percent.

The market will have a brief opening on Monday, a national holiday intermezzo on Tuesday, before reopening on Wednesday.