Stock prices strengthen, rupiah weakens
JAKARTA (JP): The prices of several big capitalized stocks on the Jakarta Stock Exchange (JSX) rose higher yesterday on the back of high expectations of a new liquidity injection into the market, securities analysts and brokers said.
The stock prices on the JSX rose 4.7 percent yesterday with the main price gauge increasing by 18.94 points to 410.20 with a total turnover of 626.3 million shares valued at Rp 412.987 billion (US$114.71 million).
The strengthening stock prices were attributed to President Soeharto's order last week to state-owned companies to use one percent of their profits to buy stocks in the stock market.
Most securities analysts said the President's move could signal that more funds would soon enter the moribund exchange.
"People expect that large stocks and state companies' stocks would benefit from the new funds," the research head of Trimegah Securities, David Chang said yesterday.
Most companies have suffered from a lack of liquidity as a result of the tight monetary policy imposed by the government since early August to shore up the rupiah.
Sjahrir, a noted analyst also welcomed the President's instruction because it would enliven investor interest in certain selected big cap stocks like Bank BNI, Telkom and Tambang Timah.
"You know, the price of BNI's share is now lower than its Initial Public Offering (IPO) price of Rp 850 last year," he said.
Given the depressed prices, long-term investors would certainly gain in the long term if they purchased the blue chip stocks now, he said.
However, other analysts warned that such intervention like the President's move would not increase market sentiment in the long run.
"The general feeling is that the upbeat sentiment from the instruction will not last long because there is no change in the fundamentals of most companies in Indonesia," Chang said.
"It is some sort of a psychological game. The President's move is good for the market for only a while," Trimegah's Chang said.
Some analysts also attributed yesterday's rise to the government's plan to disburse the $5 billion standby loan pledged by Singapore to improve the liquidity of the private sector.
As stocks gained ground, the rupiah further softened in late trading yesterday, closing at 3,605/25 against the U.S. dollar compared to the opening of 3,570 in the morning session.
Currency dealers said that the central bank, Bank Indonesia, was seen in the market with a unconfirmed limited amount of dollar selling.
"Bank Indonesia sold a limited amount of dollars when the rupiah hit 3,630 yesterday," a local bank chief dealer said yesterday.
Currency dealers said that the rupiah remained weak but it managed to strengthen after it touched yesterday's low of 3,650 during the midday trading session.
Bank Indonesia governor Soedradjad Djiwandono, told the House of Representatives' budget and financial commission yesterday that the government would continue to intervene in the foreign exchange market if needed either alone or jointly with other central banks in the region.
"But intervention goes against the market trend now. The central bank cannot stop companies from buying dollars to pay their foreign debts," a chief dealer with a local private bank said. (aly)