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)