Stocks, rupiah buoyed by optimism over CGI talks

Stocks, rupiah buoyed by optimism over CGI talks

JAKARTA (JP): Market optimism that international lenders will
provide a significantly larger loan to Indonesia this year
continued to keep the rupiah and stock prices on the Jakarta
Stock Exchange (JSX) buoyant yesterday.

Currency dealers said the market was bullish on the rupiah
because of expectations that a positive outcome from the
Consultative Group on Indonesia (CGI) meeting would propel the
rupiah even higher.

"It's all from CGI. The market is almost certain that the CGI
will meet Indonesia's demands for more funds to finance its
economic restructuring program," a chief dealer with a local
private bank said.

The rupiah strengthened 2.5 percent to close at 13,000 against
the U.S. dollar on the Jakarta spot market yesterday, up from
Tuesday's close of 13,500.

"If market expectations are realized, the rupiah will still
have room to strengthen past 13,000 and test 12,500," the chief
dealer said.

The CGI, a consortium of donor countries and multilateral
lending agencies chaired by the World Bank, began its two-day
meeting in Paris yesterday. The CGI is expected to lend Indonesia
at least US$8 billion in this fiscal year.

Dealers said the rupiah was also supported by Bank Indonesia's
move to start weekly auctions of one-month promissory notes
(SBIs) yesterday.

Although the auction of one month SBIs raised only Rp 7
trillion (US$530 million) in public funds -- from an initial
target of Rp 13 trillion -- it absorbed excess money out of some
segments of the market.

Positive sentiment also spread to the local stock market,
sending the main price index 0.3 percent higher at the close of
trade yesterday.

The JSX Composite Index closed 1.565 points higher at 485.096.
Turnover totaled 230.9 million shares valued at Rp 365.78 billion
(US$27.8 million).

Head of research at Vickers Ballas Tamara, Noraya Soewarno,
said the strengthening rupiah and optimism over the CGI meeting
had stimulated speculative local investors to place buying orders
on selected stocks.

"The dominant factor seems to be the CGI meeting, especially
with the reentry of the Netherlands after being excluded by
former president (Soeharto)," she said.

Despite the continuing gains, foreign investors remained on
the sidelines because there were no fresh leads to draw them back
into the market, stockbrokers said.

With the relative absence of foreign investors, local
investors continued to dominate trading, targeting some big cap
stocks with foreign exchange debts like cigarette maker PT HM
Sampoerna and car manufacturer PT Astra International.

Astra closed Rp 50 higher at Rp 1,125 on 10.29 million shares
changing hands. Sampoerna climbed Rp 475 to Rp 3,575 with 9.16
million shares traded, while competitor PT Gudang Garam gained Rp
300 to Rp 9,050 on 1.27 million shares traded.

However, the strengthening rupiah sparked arbitrage selling on
dual-listed stocks like state satellite operator PT Indosat,
state domestic telecommunications giant PT Telkom, and tin mining
company PT Tambang Timah.

Indosat dipped Rp 275 to Rp 14,725 on 75,500 shares traded,
while Telkom managed to book an Rp 25 gain, closing at Rp 4,375
on 11.99 million shares traded. Tambang Timah dropped Rp 525 to
close at Rp 8,700 on 589,500 shares traded. (rid)