Stock prices rise again on Paris debt agreement
JAKARTA (JP): Local stock prices rose for a second consecutive day on Wednesday due to late buying of undervalued blue chip stocks and renewed confidence following an agreement between the government and the Paris Club to roll over part of the country's sovereign debt, stockbrokers said.
The rupiah remained stable, closing at 11,075 against the U.S. dollar.
Stockbrokers said news that the government had reached an agreement with the Paris Club to reschedule part of the country's sovereign debt had slightly improved investor sentiment in the local market.
"This is good news, though it didn't ignite any massive buying in the local market," a broker with Trimegah Securindolestari said, referring to the market's modest activity.
Major international lenders grouped in the Paris Club agreed in Paris on Wednesday to reschedule US$4.2 billion of Indonesia's sovereign debt payments.
Stockbrokers said government reassurances that it would not impose Malaysian-style capital controls had convinced most investors who had placed large selling orders over the past few days to reenter the market on Wednesday.
"I think the market has started to believe that the government will not impose any capital controls," said Andre Cita, an associate director of state-owned securities firm PT Bahana Securities.
Denials
Swirling market speculation that the government would introduce a capital control system had sparked panic selling by foreign and local investors over the past several days despite repeated denials by the Indonesian monetary authority.
As a result, the main price gauge in the local bourse hit a seven-year low of 256.83 on Monday.
The Jakarta Stock Exchange (JSX) Index closed 1.37 points higher to 262.25 on Wednesday on a total volume of 310.68 million shares changing hands valued at Rp 198.55 billion ($18.09 million).
Gainers led losers 56 to 30 with 78 stocks unchanged.
Brokers said that increasing speculation that the government would increase its telecommunications tariffs had driven investors to buy telecommunication stocks, boosting Telkom's stock price Rp 50 to Rp 1,575 on 19.76 million shares changing hands, while international call operator PT Indosat saw an increase of Rp 200 to Rp 5,750 on 563,500 shares traded.
Cita, however, warned that the market was still fazed by the country's political situation following reports that hundreds of students rallied outside the House of Representatives on Wednesday to protest escalating prices and massive unemployment.
"Concerns over the domestic political situation has deflated buying sentiments," Cita said, pointing out that persistent fears of a political meltdown in the run-up to the General Assembly of the People's Consultative Assembly in November would further dampen investments.
The rupiah remained stable, closing at 11,075 on Wednesday -- almost unchanged from Tuesday's close at 11,100 due to the absence of a fresh lead in the local market.
"Market participants were reluctant to take any new position," Robert Z. Toruan, a dealer with Bank Niaga, said.
He said the agreement concluded between the government and the Paris Club did not help the rupiah since investors remained cautious of the political and social situation in the country.
"The political and social situation has played a significant role in determining the direction of the financial market," he said, pointing out that the rupiah was expected to trade between 11,100 and 11,300 in the days ahead. (aly)