Stocks recoup their losses, rupiah stays flat

JAKARTA (JP): Speculative buying on banking stocks fueled a 1.9 percent gain on the local market on Thursday, but the rupiah held its own to end the day virtually unchanged.

After a sharp correction of 7.7 percent on Wednesday, the market was rattled by rumors that the government would soon announce banks to be merged or liquidated because of their poor capital position.

Investors scrambled to grab shares of quality banks likely to escape the purge and dumped those of suspect institutions.

Stockbrokers identified domestic speculative traders in the thick of the activities.

"All these things are speculative trading. Those speculative investors believe that some banking shares will improve following the expected announcement," a dealer with a local securities firm said.

The Jakarta Stock Exchange (JSX) Composite Index closed 7.295 points higher at 394.678.

Trading volume reached 514.5 million shares worth Rp 333.1 billion (US$44.7 million).

Gainers outpaced losers by 70 to 38, with 75 stocks unchanged.

Shares of Bank Internasional Indonesia were the most actively traded in terms of volume, gaining Rp 75 to close at Rp 300 on 69.6 million traded.

Bank Panin was a close second with its shares rising Rp 150 to Rp 475 on 41.98 million traded.

In contrast, the third most actively traded stock was Bank Ficorinvest, rumored to be on the list of closures. Ficorinvest stocks slid Rp 25 to Rp 100 on 31.8 million shares.

Most large-cap stocks also gained. Market leader state-owned telecommunications firm PT Telkom gained Rp 75 to Rp 2,725 on 8.74 million shares traded.

Panin Securities' head of research Anton Karlam said speculative buying would continue to rule the market because there was no fundamental argument to place long-term investment.

He predicted that trading in the local market would continue to be relatively active following the entrance of foreign funds.

Foreign funds have started to reenter emerging markets, including Indonesia, following banking rate cuts in the United States, several European countries and also here.

"However, we cannot expect any long-term investment yet. It remains the 'hot' money which enters this market and which easily flies away once an unfavorable situation occurs."

He said stability on the political and economic fronts, especially in the rupiah, would keep fairweather investors here longer.

In the currency market, meanwhile, trading on the rupiah was meager and most foreign operators remained on the sidelines.

The rupiah ended Jakarta trading at 7,450 against the dollar, barely unmoved from Wednesday's close of 7,475.

A chief dealer at a local private bank said: "Today is again very quite. I did not see any foreign players around. Besides, local players were also subdued ahead of the year-end."

He said the situation of some state banks selling dollars was balanced by those buying. "At the end, they had their position squared."

Dealers said the market would remain quiet on Friday ahead of the weekend. The dollar is expected to trade between Rp 7,400 and Rp 7,600. (rid)