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)
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