Stocks strengthen, rupiah still stable

Stocks strengthen, rupiah still stable

JAKARTA (JP): Share prices rose 4.2 percent yesterday and the
rupiah remained stable at 3,000 level against the U.S. dollar in
response to the lifting of the 49 percent foreign portfolio
holding limit and interest rate cuts, dealers and brokers said.

The Jakarta Stock Exchange composite index closed up 21.282
points at 533.870, with total turnover of 519.732 million shares
valued at Rp 545.439 billion (US$179.4 million).

Spot rupiah, which opened at 3,005/3,020, weakened in morning
trading when Bank Indonesia announced interest rate cuts by 300
basis points, but strengthened in the afternoon and closed at
3,035/3,045.

Stockbrokers and foreign exchange dealers said the newly
announced reform package had boosted market sentiment in stocks
and rupiah.

A vice president at Mashil Jaya Securities, Tjandra Kartika,
said the government's move to scrap the foreign portfolio
investment limit and to lower interest rates was the only reason
for yesterday's gains on the exchange.

"But it will only help the market in the short-term... not in
the long-term," Tjandra said.

Minister of Finance Mar'ie Muhammad said in a decree yesterday
that the government had lifted a 49-percent limit of foreign
ownership in listed firms on the Jakarta bourse. The new decree
was also made effective yesterday.

Jakarta Stock Exchange president Cyrill Noerhadi said that as
a follow-up to the new regulation, the abolition of foreign
ownership restrictions would "technically" become effective from
today.

Bank Indonesia, the central bank, yesterday also cut its
benchmark Bank Indonesia Certificate (SBI) interest rates in
another follow-up move to the newly announced reform package.

The bank cut its one- and three-month bilateral rates by 300
basis points, leading to improved confidence on the stock market
which also helped rupiah sentiment.

The bank lowered one- and three-month bilateral SBI rates to
27 percent and 25 percent respectively.

But the bank kept other rates unchanged. Overnight bilateral
SBIs were kept at 15.0 percent, four-to-six day at 16 percent,
seven at 20 percent, two-week at 22 percent, six at 12.125
percent and one-year at 12.75 percent.

The bank did not offer short-term securities (SBPUs) and did
not carry out an SBI auction.

Foreign exchange dealers said despite the cut in interest
rates the rupiah managed to buck the regional weakening trend,
indicating that market confidence on the currency was returning.

"But we have to wait until next week to see if the rupiah is
really stable at the current level of 3,000," one local bank
dealer said.

He said trading was still very thin, at $1 million, $2 million
and $3 million at the most.

"We are still very cautious. We prefer not to open a new
position because we're afraid of getting burned once we enter a
new position," he said.

He added the market had felt eased rupiah liquidity, with
interbank rates continuing to drop.

Overnight rupiah was fluctuating between 35 percent to 60
percent yesterday and settled at between 30 percent to 40 percent
in the afternoon.

Dealers said swap rates also fell across the curve, with
short-dated swaps declining by three to five points while longer-
term rates fell by 20 to 40 points.

They said swap rates stabilized in the afternoon.

One-month swap was at 54/59, two at 100/140, three at 135/150
and six at 240/260 points. (aly/rid)

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