Stock prices drop while rupiah firms

Stock prices drop while rupiah firms

JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX)
dropped 1 percent yesterday on market concern over the ongoing
battle between the government and the International Monetary Fund
(IMF).

Stockbrokers said trading activity remained moderate with
foreign brokerage houses taking a "wait-and-see" attitude toward
current developments.

Brokers said the dispute between the government and the IMF
had prompted investors to move to the sidelines, resulting in a
quiet market.

"Most foreign brokerage houses are on the selling side," a
broker with Trimegah Securities said, pointing out that
SBC Warburg, OSBC, Jardine Flemming Nusantara and Indosuez WICarr
were net sellers yesterday.

The JSX Composite Index fell 5.3 points to 490.47 from 495.08
the previous day.

A total of 348.11 million shares changed hands on the regular
market worth Rp 483.34 billion (US$48.33 million).

An analyst with Mashill Jaya Securities, Eddy Widjoyo, said
trading activity had lost its direction as the market had not
seen any decisive move from the government to improve the
country's wrecked economy.

"It's difficult to see the market direction during such
uncertainty," he said.

Brokers and analysts said the unresolved standoff between
Indonesia and the IMF over solutions to improve the country's
ailing economy had sent negative signals to investors.

Brokers said investors in the local market became increasingly
worried over the IMF's announcement to postpone its second $3
billion tranche of funding for Indonesia as Jakarta was seen as
not consistently implementing its economic reform programs.

"That only worsens public confidence in the government, and as
a result, more companies are likely to collapse," Eddy said.

Despite the tension, the government said yesterday it would
send a team to Washington soon for talks with the IMF and the
United States.

The deputy secretary-general of the Economic and Monetary
Resilience Council, Fuad Bawazier, said the team would seek a
resolution to the stalemate.

As stocks declined, the ailing rupiah managed to recoup from
its lower rates earlier in the day. The currency closed at
10,500/10,700 against the American dollar in very moderate
trading, currency dealers said.

They said the rupiah slipped to as low as 11,300/11,500 in the
morning trading yesterday due to the standoff between the
government and the IMF.

Yesterday's close was stronger than the previous day's close
of 10,800/11,000.

Currency dealers said the rupiah, which opened at
11,200/11,350, continued to recover gradually against the
American greenback in late trading on strong market speculation
that the government would go ahead with its plan to peg the
rupiah to a foreign currency at a fixed exchange rate under the
currency board system.

Dealers said overseas funds, especially from Singapore, sold
dollars for rupiah, speculating that a currency board could be
announced soon.

"Overseas operators sense that President Soeharto will come up
with something new in his inauguration speech tomorrow (today),"
a chief dealer with a local private bank said, pointing to a
likelihood that the government would introduce the currency board
system plan. (aly)