Stocks gain ground, rupiah stable on reform package

JAKARTA (JP): Local stock prices gained ground yesterday and the rupiah stabilized following a government announcement on plans to lift foreign portfolio ownership limits and gradually decrease interest rates, analysts and dealers said.

Stockbrokers said share prices on the Jakarta Stock Exchange rose 7 percent yesterday -- the first rise since Aug. 27 -- with the composite index jumping 33.57 points to close at 512.58.

The stock market lost 31 percent from its peak level on July 8 when the composite index reached 740.88 points.

Dealers said yesterday's largest intraday increase since July 8 was in response to the government's reform package announcement.

"The market responded positively. We expect the government will follow up on the decision quickly, so investors will fully regain their confidence," said one stockbroker.

Yesterday's increase was driven by large cap stocks. Most blue chip stocks like Telkom, Indosat, Gudang Garam, Bank Negara Indonesia and HM Sampoerna booked gains yesterday.

Head of research at Sigma Batara Securities, Fadjar Limin Sutandi, said he suspected the measures were aimed at addressing the primary market.

"I'm afraid it will not help trading on the secondary market. But, let's see how the market reacts tomorrow," he said.

Fadjar said investors were still waiting for positive action by the government to prevent the rupiah and stock market from tumbling further.

Most securities analysts agreed the government's planned measures would help enliven investors' confidence in the country's capital market, but that would not be enough.

Yesterday's announcement also helped prevent the rupiah from further falling against the U.S. dollar, foreign exchange dealers said.

Spot rupiah, which opened at 3,000/3,040 against the U.S. greenback, dropped to a day low of 3,070 but soon recovered following the announcement to close at 3,025/3,045.

Dealers said trading was slow and volume was thin throughout the day, with the rupiah continuing to suffer from sustained weakness in the region.

They said a strong recovery in the stock market might have improved sentiment, but further falls in the baht and the Malaysian ringgit kept the rupiah below the 3,000 level.

One local bank chief dealer said Singapore players started releasing their dollars after the government announced the measures and helped bring the rupiah up to 2,995.

But then domestic corporates and banks quickly bought cheap dollar and forced the rupiah to again cross the 3,000 level, he said.

"The appetite for dollar remains strong among local corporates. I think their confidence on rupiah has not returned yet even after the government announced some measures to reinvigorate the economy," he said.

The market was injected a fresh liquidity from the maturing Bank Indonesia Certificates (SBIs) totaling Rp 855 billion.

The central bank had channeled liquidity credits to 52 troubled banks, which then helped ease liquidity in the market, a dealer said.

Interbank rates fell again yesterday, with overnight rupiah dropping to 25 percent from 60 percent in the morning and one- month to 35 percent from over 65 percent.

However, the central bank maintained its rates for bilateral SBIs yesterday. The bank did not accept short-term securities (SBPUs) and also did not hold an SBI auction.

One-month swap was at 65/85, two at 110/150, three at 155/180 and six at 290/310 points. (aly/rid)

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