Stocks and rupiah plunge following weekend unrest
JAKARTA (JP): Stock prices and the rupiah plunged on the local market yesterday as jittery investors lost confidence in the aftermath of the weekend riots.
The Jakarta Stock Exchange (JSX) lost 3.6 percent on panic selling as most investors became nervous to stay in the market, with the Indonesian rupiah falling by nearly 30 points in early trading.
"Today's drop is purely driven by the political issue," noted economist Sjahrir told The Jakarta Post. "It indicates that the stock market is becoming more sensitive to political chaos."
The JSX composite index closed down 20.57 points, or around 3.6 percent, to 540.74 points with 97 counters suffering losses as compared to only seven gainers. The drop was the largest so far on the JSX.
A dealer said the larger part of yesterday's selling was by foreign investors, with foreign-based securities houses such as Merrill Lynch, HG Asia, ING Baring, Schroders, Jardine Flemming Nusantara, Credit Lyonnais and Morgan Grandfell dominating the selling spree.
PT Danareksa and PT Bahana Securities, two state-owned securities companies, took heavy buy positions on blue-chip shares, widely seen by analysts here as the two state-owned securities' moves to halt the free fall of the market's index.
"I would say that the prices should have been dropped by more than 5 percent and not 3.7 percent if there was no intervention (by the two firms)," a dealer with a European-based brokerage told the Post.
"Data shows that Danareksa and Bahana Securities started to buy blue-chip stocks -- including Telkom, Indosat, HM Sampoerna and Gudang Garam -- one hour before the market closed, when the drop already reached 32.9 points or 5.8 percent," the dealer said.
Telkom fell Rp 100 to close at Rp 3,225 after hitting a low of Rp 3,100 before the intervention, while Indosat declined by Rp 75 to Rp 7,450 after reaching a low of Rp 7,200.
Cigarette maker HM Sampoerna reached its low of Rp 21,600 before closing down by Rp 1,500 at Rp 22,400, while Gudang Garam dropped by Rp 450 to Rp 8,675 after hitting its low of Rp 8,225.
Well-diversified conglomerate Bimantara Citra -- controlled by President Soeharto's second son Bambang Trihatmodjo -- fell by Rp 200 to close at Rp 2,075. Meanwhile, toll-road developer Citra Marga -- controlled by Soeharto's eldest daughter Siti Hardiyanti Rukmana -- lost Rp 175 to Rp 3,175.
The Indonesian rupiah plunged by nearly 30 points to its two- year low of Rp 2,360 against the U.S. dollar yesterday from Friday's close of Rp 2,332 before gaining ground in afternoon trading.
The Indonesian currency rebounded in the afternoon to a range between Rp 2,348 and Rp 2,350 after jittery investors saw no imminent fresh riots taking place during the day.
Foreign exchange dealers said that the panic selling started when offshore investors dumped their rupiah on fears that the riots would continue.
The selling spree on the Indonesian currency made by foreign players eased at midday as many local investors benefited from the situation and bought the rupiah for a profit, a foreign exchange dealer at Bank Bira said.
"The rupiah's sharp fall was mainly due to panic selling, and I am really certain that such a condition will be temporary," he said.
A Bank Bali dealer said that the tight condition in the money market also helped ease the panic selling on the Indonesian currency.
The rupiah supply in the market was very tight, with the overnight interest rate reaching 16 percent per annum, he said. "It means that it will be too costly for you to buy dollars with Indonesian currency," he added.
A source said that high-level officials of Bank Indonesia, the central bank, held a special meeting yesterday to discuss necessary steps to anticipate a possible worsening of the rupiah's value.
A dealer at a foreign exchange bank said that the central bank had not yet taken any measures in dealing with the money market situation.
"I think the situation is still under control. At the current stage, I don't think it is necessary for the central bank to step in," he said, adding that the rupiah's value was still within Bank Indonesia's intervention rates.
The central bank set its intervention rates against the U.S. dollar at 2,327 and 2,445 yesterday, meaning that it will intervene in the market only if the rupiah's value is more than 2,445 or less than 2,327 against the dollar.
The rupiah hit a previous year-low of 2,349 on July 4 due to false rumors about President Soeharto's health. The Indonesian currency recovered on Friday to end the week at 2,332 after declining to 2,338 from the week's opening of 2,329. (alo/hen)