Stock up almost 5% as rupiah strengthens

JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) rose nearly 5 percent yesterday, supported by strong foreign and local buying of blue chip and mid-size stocks, brokers said.

They said foreign brokerage houses like Credit Lyonnais and Indosuez-W.I. Carr and state-owned Bahana Securities were on net buying positions for most blue chip stocks.

"Foreign investors are making a lot more buying orders than selling orders on large capitalized stocks," Bahana Securities' head of equities, Bruce Rolph, said.

Brokers said local and foreign investors shrugged off news reports of riots and demonstrations in several towns across the country yesterday.

"It's a bit strange that the capital and currency markets did not react negatively to riots and demonstrations," a broker with a joint-venture securities firm said.

But brokers said investors were confused and worried about the government's plan on a currency board system, which would peg the rupiah to a fixed exchange rate with a hard currency, most likely the U.S. dollar.

"I think they are afraid the government will soon peg the rupiah to a foreign exchange at fixed rate soon (and that they would loose money)," Rolph said.

Despite increasing international disagreement over the government's currency board plan, the rupiah strengthened slightly yesterday to close at 8,900 against the U.S. dollar from the previous day's close at 9,000. The rupiah even touched 8,500 yesterday.

"I think Singapore operators are afraid to hold their long dollar positions for fear of the peg news," a chief dealer with a local private bank said.

Stock analysts said the volatility of the rupiah always influenced the stock market. They concluded the government's plan to peg the rupiah to a hard currency could establish a good environment for stock trading.

Another broker with a joint venture securities firm said stock trading activities were unusually high yesterday, pointing to massive speculative transactions.

"It's quite difficult to predict the direction of the market now. I just don't understand it because some or even many people are trading on speculative motives," the broker said.

The JSX Composite Index rose 23.57 points to close at 496.25 yesterday from 472.67 the previous day on a total turnover of 646.3 million shares on the regular market worth Rp 719.73 billion (US$80.29 million).

Most large-cap stocks made some gains yesterday, with state- owned telephone company Telkom rising Rp 300 to Rp 3,775 and satellite operator Indosat increasing Rp 50 to Rp 13,650.

Cigarette maker Sampoerna climbed Rp 200 to Rp 5,525 and its competitor Gudang Garam rose Rp 1,250 to Rp 11,625.

Bank International Indonesia rose Rp 25 to Rp 600, Bank Negara Indonesia also increased Rp 25 to Rp 575 and Bank Dagang Nasional Indonesia remained unchanged at Rp 300. (aly)