Stock prices surge but rupiah falls
Stock prices surge but rupiah falls
JAKARTA (JP): The rupiah descended sharply to 9,550 against
the American dollar yesterday on a combination of political
tensions and mounting concerns over the private sector debt,
currency dealers said.
However, the weakening rupiah did not riddle the stock market
as stock prices on the Jakarta Stock Exchange (JSX) rose 6.06
percent after five local private banks announced a merger,
brokers said.
The announcement of the planned merger among listed Bank
Internasional Indonesia (BII), Bank Dagang Nasional Indonesia
(BDNI), Bank Tiara Asia, and unlisted Bank Sahid Gajah Perkasa
and Bank Dewa Rutji failed to keep the rupiah on an upward trend
against the greenback.
The merged bank -- which will retain the BII brand name --
will constitute the country's largest listed private bank with
total assets of Rp 50 trillion (US$5.55 billion) and total equity
of Rp 5 trillion.
"It's just a bit strange to see the movement of the rupiah
today (yesterday). It stabilized in the morning session before
plunging to almost 10,000 after lunch break," a local private
bank chief dealer said.
The spot rupiah closed at 9,550/9,750 to the dollar against an
opening of 8,600/8,800 in the morning before nose-diving to 9,900
after lunch break.
Dealers said reports on rioting in several small towns in East
Java and a protest at the House of Representatives compound put
more pressure on the rupiah.
Attacks on shops and rice mills were reported in the area of
Banyuwangi until Saturday evening, with angry mobs forcing open
closed shops and dragging the shops' contents onto the streets.
And yesterday, about 200 people held a protest at the House of
Representatives building, demanding that President Soeharto step
down and calling on the government to reduce the soaring prices
of staples.
"Adding to the political tension, the rupiah's fall is largely
attributed to foreign investors' concern about the private sector
debt in Indonesia," a chief dealer said.
He suggested that the government help the private sector
resolve the debt problem because Indonesia's monetary crisis was
largely driven by the mounting private debt.
"It's just a pity the government has not mentioned any
solution to this problem in the economic reforms announced by the
government last week," the dealer said.
"The financial market is now waiting for a kind of solution
for private sector debt, though the government has repeatedly
promised not to bail it out," he said.
"As long as the government and the private sector don't solve
this problem, it's almost impossible for the rupiah to strengthen
against the dollar," the dealer said.
The government said Indonesia's overall external debt was $140
billion at the end of last year. It did not mention the private
sector portion, but an earlier figure showed private sector debt
accounted for about 55 percent of the total debt.
As the rupiah fell yesterday, stock prices on the JSX rose
sharply with the main price index rising 25.10 points to 439.02
from 413.92 on Friday last week.
Over 785.01 million shares changed hands in the regular market
yesterday valued at Rp 754.78 billion.
Brokers attributed the rise in stock prices to a positive
market response to the announcement of the planned merger of
three listed banks and two unlisted ones.
"The announcement shows that the government and private banks
are serious in boosting financial reforms," head of sales at BZW
Niaga Securities Adnan Tan said.
An institutional broker with Trimegah Securities said foreign
investors were aggressively entering the market yesterday for
banking stocks in buoyant trading transactions due to the merger
announcement.
"I think most blue-chip stocks are following leads in the
banking sector," the Trimegah broker said.
Brokers also attributed the increase to the strengthening of
regional stock markets.
However, yesterday's trading was marred by the suspension of
Bank Tiara stocks due to a 45 percent increase in its price to Rp
300 from Rp 200 at the opening. (aly)
Editorial -- Page 4
Debt -- Page 9