Stocks gain ground as rupiah weakens

JAKARTA (JP): The Jakarta Stock Exchange recorded a technical rebound yesterday as the rupiah weakened against the U.S. dollar on the back of sufficient liquidity supply, analysts and dealers said.

Stockbrokers said share prices on the exchange rose 2.5 percent, with the composite index rising 13.309 points to close at 554.238.

In the currency market, spot rupiah closed at 2,770/2,780, compared to an opening of 2,690/2,710. Overnight rupiah fell to 20 percent from 100 percent in the morning.

A securities analyst at Vickers Ballas Tamara, Immanat Dalimunthe, said though the index rose, most investors could not yet predict the market's direction as the currency was still volatile.

"The main focus now is on the rupiah, not the stock market. Rupiah determines the stock market," he said.

The rise in the composite index was not an indication the market had recovered, he warned.

"It's just a technical rebound. Some investors were hunting for cheap blue-chip stocks," he said.

The composite index rose 2.5 percent yesterday after plunging a record 5.53 percent Monday and 4.75 percent last Friday.

The index reached an all-time high of 740.83 on July 8 but has since slumped 25 percent.

Immanat said most investors would not re-enter the stock market as long as the rupiah remained tight and volatile.

The government has repeatedly said it would continue its tight monetary and fiscal policies until the rupiah stabilizes.

Businesspeople and analysts have called on the government to gradually ease rupiah liquidity to prevent possible bank run and corporate bankruptcy.

Chairman of the Indonesian Chamber of Commerce and Industry, Aburizal Bakrie, said here Monday the government should end the tight monetary policy as it could kill big and small businesses.

"We hope the current tight monetary policy will not be pursued for more than one month," Aburizal said.

Bank Indonesia, the central bank, still maintained its tight rupiah policy, keeping high interest rates for bilateral promissory papers (SBIs).

The bank offered overnight bilateral SBIs at 15 percent, two- to-six day at 16.0 percent, seven at 20 percent, two-week at 22.0 percent, one-month at 30 percent, three at 28 percent, six-month at 12.125 and one-year at 12.75 percent.

The bank did not buy short-term securities (SBPUs) from commercial banks.

Despite the government's persistent tight monetary policy, rupiah supply in the banking system eased yesterday, forcing rupiah to weaken, one local foreign exchange bank dealer said.

"We have sufficient liquidity supply today, with rupiah coming from not only local but also offshore players, especially from Singapore," the dealer said.

He said relatively ample liquidity supply, coupled with anticipation of lower interest rates in the short-term, prompted operators to unload swaps.

Overnight swap fell to 5/6 at yesterday's close from 12/16 Monday. Longer-term rates also dropped.

One-month swap fell to 75/95 from 170/200, two to 135/175 from 230/280, three to 170/185 from 360/380 and six to 295/300 from 375/410 points. (aly/rid)

Speculators -- Page 10

Markets -- Page 11