Stock prices strengthen, rupiah weakens
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)