Stock, currency markets unfazed by impending war in Aceh

A'an Suryana, The Jakarta Post, Jakarta

The looming war in Aceh has not affected Indonesia's stock and currency markets as players see the planned war as a local security problem that does not pose any national threat.

Stock and currency markets remained steadfast on Tuesday, despite escalating tension in the region after the government's deadline for the separatist Free Aceh Movement (GAM) to disarm passed on Monday.

The stock market barely moved, ending the day on 473.51 points, up from 473.93 the previous day, while the rupiah remained steady at Rp 8,440 against the U.S. dollar on Tuesday from Rp 8,430 on Monday.

Stock analyst Jasso Winarto said the steady stock index was largely due to the recent success of Bank Danamon's share divestment, a decision by rating agency Standard & Poor's to upgrade the country's credit rating by one notch and gains made on Wall Street.

Regarding the imminent war in Aceh, Jasso said it was weighing slightly on market sentiment as its impact on the economy was expected to be minimal.

Economist Iman Sugema from the Institute for Development of Economics and Finance (Indef) agreed, saying any war in Aceh would not affect Indonesia's economy as a whole.

"The tension in Aceh is local in nature," he said.

Jasso said that the market had anticipated the war, and market players mostly believed that the Indonesian Military (TNI) would manage to crush the rebels.

This confidence was largely attributed to the strength of the Indonesian Military (TNI), which was sending 50,000 well-equipped personnel. GAM, by contrast, had just 5,000 poorly equipped fighters.

Most of all, the deployment of soldiers had not sparked objections from domestic or international groups.

On Tuesday, investors remained eager to find blue chip shares, as represented by the hike of the index's trading volume and values, compared to the previous day.

The trading volume rose slightly to 520 million shares on Tuesday from 449 million shares traded the previous day, while the trading value also increased to Rp 535.19 billion from Rp 413.48 billion.

All in all, the stock index has been steady at 460 points to 480 points since last week.

In the currency market, the rupiah was also performing well despite the tension. The rupiah remained trading below the Rp 8,500 level.

Overall, the rupiah has performed well at level Rp 8,400 to Rp 8,600 since last week. Monday's close at Rp 8,430 was a 32-month high.

Currency analyst Farial Anwar said that market players were already immune and getting used to security problems in the country.

Only when GAM enlarged its war zones into Jakarta, for example, by launching terror attacks, would investors retreat from the local market.

Or, if attacks do occur, it could also invite speculators to play the market to gain short-term profits, Farial said.

"If the bombing happens in Jakarta, it may attract speculators to take short-term profits right after the bombing, but after that business will run as usual," he said.