Stock market, rupiah looking better: Mar'ie

JAKARTA (JP): Minister of Finance Mar'ie Muhammad predicted yesterday that Indonesia's stock prices would rebound and the rupiah would continue to strengthen next year.

Speaking after announcing new local stock market rules, Mar'ie said the crisis sweeping across the region had made overdose corrections to most stock markets in the region, including Indonesia's.

"I'm firmly optimistic that the prospects of our stock market will be brighter in 1998, especially if it is supported by market players and the public," Mar'ie said.

He said most Indonesian stocks, including the blue chips, were already undervalued.

"I have repeatedly said they are undervalued and therefore, this is the time to buy."

He said the average price earning ratio (PER) of local stock currently stood at nine times, far lower than the normal level of 15 times.

"Whatever measures you use, a PER ratio of nine times is just too low. It is not sustainable. I think the sustainable level should be 15 times.

"Based on those assessments, I see the possibility of stock prices increasing as much greater than the possibility of them dropping further," he said.

The Jakarta Stock Exchange (JSX) composite index, the main price gauge for the Indonesia stock market, dropped 37.86 percent from 638.10 points at the beginning of the year to 396.53 points recorded Wednesday.

Stock trading on the JSX was closed Thursday and yesterday for Christmas.

According to the Indonesian Capital Market Supervisory Agency, the fall in Indonesia's stock market index was less severe than the falls in the Philippines, Thailand and Malaysia, where the stock market indices dropped 41.44 percent, 54.65 percent and 55.28 percent respectively.

Singapore is the least affected market, with its benchmark index falling 29.28 percent during the same period.

Mar'ie also predicted yesterday that the Indonesian rupiah would continue to strengthen next year because it had depreciated far below its real value.

"I'm also optimistic that our rupiah will continue to strengthen into next year," he said.

The rupiah has dropped more than 50 percent of its value against the U.S. dollar since the beginning of this year.

"This afternoon (yesterday afternoon), I checked the rupiah at the 4,900 level (against the U.S. dollar). Transactions did happen at that level. Who said it neared 7,000? And in the coming days, the rupiah will continue to strengthen," he said.

Currency dealers said spot rupiah closed at 5,150/5,250 to the greenback in Jakarta, compared to an opening of 5,800/5,900. It fell briefly to 6,000.

Dealers said the rupiah was supported by market intervention from Bank Indonesia, which was seen selling dollars starting at 5,650 down to 5,300.

They said the intervention was effective in propping up the rupiah as the market was very thin. Most operators kept their square position toward the year's end. Only desperate operators with an open position would enter the market. (rid)

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