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)

Editorial -- Page 4

Currency -- Page 11