Stock prices plunge 4.8% as rupiah remains stable

Stock prices plunge 4.8% as rupiah remains stable

JAKARTA (JP): Stock prices on the Jakarta Stock Exchange
suffered the biggest intraday drop of 4.8 percent yesterday while
the Indonesian rupiah was stable at 2,700 level against the U.S.
dollar.

The composite index dropped 28.665 points to 574.395 -- its
lowest close since Nov. 1 and turnover totaled 404.5 million
shares valued at Rp 580.3 billion (US$212.6 million).

Securities analysts attributed the plunge to the increasing
worries over the health of the country's banking industry as a
result of the rupiah's volatility.

"The banking stocks are likely to be under strong selling
pressure because their performance is likely to be poor as a
result of the increasing interest rate," an analyst said.

Standard & Poor said Thursday it affirmed its ratings on Bank
Negara Indonesia (BNI), Bank Danamon and Bank Umum Nasional but
revised the outlook on these ratings to negative from stable.

Brokers said the S&P report downgrading some of the country's
largest banks had also weakened sentiment on other banks not
included in the report.

Bank Internasional Indonesia lost Rp 150 to Rp 1,100, Bank
Danamon fell Rp 125 to Rp 775, Bank Dagang Nasional Indonesia
slipped Rp 125 to Rp 750 and BNI was down Rp 50 to Rp 1,150.

Martin Panggabean, an economist from Lippo Securities, said
yesterday a further plunge of the stock market was understandable
as investors had to sell most of the shares they held to obtain
the rupiah.

"How do you expect people to buy stocks when they do not have
rupiah in hand?" he asked.

An analyst from Harita Securities said yesterday investors
were still cautious to enter the stock market.

"The nightmare is not over yet... and the rise in yesterday's
market was merely based on a technical rebound.

"It is still difficult to make any prediction given the
current volatile market," she said.

In the foreign exchange market, the rupiah was stable against
the U.S. greenback in slow trading yesterday, dealers said.

They said spot rupiah, which opened at 2,660/2,690, suddenly
dropped 2,735 due to concerns over S&P's report. But the
tightening rupiah liquidity stopped the rupiah dropping further.

The currency strengthened in the afternoon as most banks sold
dollar in the spot market and bought them back through the
forward market. The spot rupiah closed at 2,700/2,720.

One local bank dealer said there was plenty of arbitrage
opportunity in the swap market for banks with adequate net open
positions.

Overnight swap was at 35/40 points, one-week at 75/80, one-
month at 210/215, two at 265/280, three at 320/360 and six at
410/440 points.

He said overnight rupiah liquidity improved in the afternoon,
with overnight money falling to 40 percent from 90 percent
earlier. One-week money was at 65 percent, one-month at 70/75.

The rupiah fell to an historic low of 3,045 after Bank
Indonesia, the central bank, floated the currency last week in
the wake of sustained speculative attacks on regional currencies.

The rupiah started recovering following the central bank's
shock increase of interest rates to drain excess rupiah liquidity
from the market.

The central bank doubled one-week promissory notes (SBI) to 20
percent, two to 22 percent, one-month to 30 percent and three to
28 percent.

The central bank also remained absent from the short-term
securities (SBPU) market.

Head of the treasury division at LTCB Central Asia Bank,
Farial Anwar, said everyone in the foreign exchange market should
remain vigilant as the currency had not yet stabilized.

"Although the trend on rupiah is improving, it does not mean
it's safe already," Farial told journalists.

The outlook for next week remained unchanged, with the focus
on interest rates and the tight policy, Farial added.

He said the liquidity squeeze would continue or tighten
further because of the maturing central bank forward intervention
Monday, combined with the approaching month's end.

Coordinating Minister for Economy and Finance Saleh Afiff
indicated yesterday that the government would not ease rupiah
liquidity early next week.

He said the government's main concern was to stabilize the
currency and called on the private sector to support the
government's measures.

He assured businesses and the people that the current currency
crisis would end soon if they supported the government.

"Storms don't last long," Afiff said. (aly/das/rid)