Stocks fall 4.8% as rupiah stabilizes

Stocks fall 4.8% as rupiah stabilizes

JAKARTA (JP): Share prices on the Jakarta Stock Exchange
plunged 4.8 percent yesterday from persistent regional
weaknesses, while the rupiah stabilized close to the 4,400 level
against the U.S. dollar, stockbrokers and dealers said.

The exchange's composite index, the main gauge for local share
prices, again dropped below the 400-point level yesterday. It
lost 19.829 points to close at 396.108.

Trading turnover totaled 409.5 million shares worth Rp 328.013
billion (US$72.7 million).

The rupiah, which opened at 4,405/30 against the greenback in
the spot market, weakened to 4,535 in the morning as the South
Korean won sharply fell.

The rupiah then strengthened in the afternoon as Singapore
operators continued to unload their dollar holdings. The rupiah
closed at 4,405.

"This is totally from regional weaknesses. Therefore, the
government should be more tactical in intervening in both the
currency market and the stock market to save its resources,"
Martin PH Panggabean of Lippo Securities said.

Another local stock analyst attributed the drastic fall in
local stock prices to the suspension of 16 securities houses by
the Capital Market Supervisory Agency and the lack of support
from state-owned securities firms.

"But I agree with the assumption that the regional factors are
much more dominant than the domestic ones. Unless the won settles
down, we will continue to be vulnerable," the analyst said.

He added that he did not see any fundamental arguments for
investors to reenter the stock market now when the rupiah was
faltering and interest rates remained high.

Currency dealers said the rupiah would remain fragile until
the end of this year as more and more companies would enter the
currency market to buy dollars to pay back their offshore
maturing debts.

The rupiah also was seen as very susceptible to various
rumors, especially those regarding President Soeharto.

The rupiah was knocked down to an all-time low of 4,600 on
Tuesday due to unfounded rumors that Soeharto was seriously ill.
It improved a bit Wednesday following news of Soeharto's trip to
Kuala Lumpur.

"So many factors can at any time shoot the rupiah down. And
the only factor which can boost the rupiah now is market
intervention," a local private bank chief dealer said.

"In this situation, many operators practice an in-and-out
strategy, buying dollars in the morning and selling them in the
afternoon. This way, they can make some profits," he added.

The rupiah, like other regional currencies, was believed to
have overshot. Theoretically, investors should have returned to
the rupiah. But the reality was that they continued to dump the
rupiah, dealers said.

They said when the rupiah closed firmer yesterday in Jakarta,
London players started to attack the currency by selling their
rupiah holdings.

By 11:00 GMT, dealers said, the rupiah was quoted at 3,610/30.

The chief dealer said Bank Indonesia should start easing
liquidity and lowering interest rates to prevent more local
corporations from going bankrupt due to the weakening rupiah.

"A tight liquidity and high interest rate policy has proven to
be ineffective in stopping the rupiah's depreciation. It's better
to abandon such a useless policy," he said.

Currency dealers said Bank Indonesia had been tightening
rupiah liquidity in the last few days when the rupiah came under
renewed attack.

Yesterday, the central bank absorbed more rupiah liquidity
from the market through Bank Indonesia Certificates (SBIs) and
swap interventions.

Dealers said the swap interventions would help improve dollar
liquidity, reflected by an immediate drop in the overnight dollar
rate to 6 percent from around 10 percent.

The overnight swap rate was at -0.1/par, tom/next at -0.1/0.1,
one-week at 2/3, one-month at 13/16, two at 20/35, three at
50/60, six at 140/155 and one-year at 330/370 points. (rid)