Stocks slip as rupiah strengthens
JAKARTA (JP): Local stock prices slipped slightly yesterday due to arbitrage trading on overseas-listed shares following a strengthening of the rupiah and continuing high interest rates, stockbrokers said.
The Jakarta Stock Exchange (JSX) Composite Index, the main gauge for local stock prices, fell 1.42 points to 482.37 at the close of trading.
Meanwhile, currency dealers said the rupiah continued to make gains, closing at 8,950 against the U.S. dollar on the Jakarta spot market yesterday, higher than Thursday's close of 9,050.
Stockbrokers said the strengthening of the rupiah prompted short-term investors to conduct arbitrage trading on foreign- listed stocks, benefiting from the domestic and foreign price differential.
"It's always like that. When the rupiah strengthens, those foreign-listed stocks tend to decline to adjust to their foreign prices," Mashill Jaya Securities' head of research, Tjandra Kartika, said.
The JSX has four foreign-listed stocks: domestic telecommunications firm Telkom, satellite operator Indosat, tin miner Tambang Timah and chemical firm Tri Polyta. The last one is hardly traded on the JSX.
"Since those foreign-listed stocks, plus cigarette maker Gudang Garam, account for some 60 percent of the index, their ups and downs determine market sentiment," Tjandra said.
Telkom was down Rp 100 yesterday at Rp 3,500, Indosat fell Rp 625 to 12,725, Tambang Timah was unchanged at Rp 7,550 and Gudang Garam gained Rp 50 to Rp 11,050.
Trading volume totaled 563.76 million shares in the regular market valued at Rp 608.36 billion (US$69.13 million).
A stockbroker with a joint-venture securities firm said domestic investors now dominated stock trading because most foreign investors feared violent social and political unrest ahead of the People's Consultative Assembly starting next week.
"I think the general mood remains bearish with foreign investors moving sideways," another broker said, adding that the absence of foreign investors would further weaken market sentiment.
He said rising political tensions marked by mounting student protests over the past few days did not have a significantly damaging impact on the market because many investors had discounted the demonstrations.
Analysts said it would be difficult for the stock market to strengthen if interest rates remained high.
High rates are prompting investors to leave the equity market and deposit their funds into banks.
A local foreign exchange bank's chief dealer said the monetary authority has done nothing to fight the soaring interest rates, which has almost killed most domestic banks.
"How we can survive when the interbank rate remains over 40 percent, while our prime lending rate cannot exceed 40 percent?" he asked.
He called on Bank Indonesia to set a ceiling for interbank rates to put an end to a rate war among banks. He also blamed foreign banks for starting the rate war.
"With this situation, only individuals having significant funds can benefit, while all others -- banks, companies dependent on bank loans and the people at large -- will suffer from these high rates," he said.
"We, all of us, are now being killed by two factors, namely the weak rupiah and the high interest rates," he added. (aly/rid)