Stocks up, rupiah stable

Stocks up, rupiah stable

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
rose 11.28 percent and the rupiah remained stable below the
psychological 3,000 level yesterday on the back of the new reform
package announced Wednesday.

The JSX composite index, the main price indicator on JSX
closed 60.24 points higher at 594.11 with 844.4 million shares
valued at Rp 972.4 billion (US$342.19 million) changing hands on
the regular market yesterday.

Spot rupiah, which opened at 2,920/40 in morning trading,
strengthened to 2,970/80 against the American dollar at
yesterday's close, higher than Thursday's close at 3,035/3,045.

Foreign exchange dealers said that foreign investors'
confidence in the rupiah had improved after the wide-ranging
reform package.

Minister/State Secretary Moerdiono, who is also a member of
the Monetary Council, said the government has been freeing the
rupiah to look for its market equilibrium rate.

"Therefore, one should not expect the rupiah rate against the
dollar to recover to the 2,400-2,500 range (before the floating
on Aug. 14)," Moerdiono told reporters yesterday.

"What the government wants to see is a stable rate without
volatility so that businesspeople have a firm reference for price
calculation. But at what range the rate will settle will depend
on the market," Moerdiono added.

A foreign exchange dealer at a local bank said caution was
still needed because the rupiah's stability was subject to the
condition of other regional currencies.

"The Indonesian rupiah is not isolated from other regional
currencies. You cannot let your currency rise while others in the
region fall," the dealer said.

Securities analysts and dealers agreed the strengthening of
share prices was a result of the government's reform package.

The central bank, Bank Indonesia, cut its one- and three-month
bilateral central bank certificate (SBI) rates by three
percentage points Thursday to 27 percent and 25 percent
respectively.

"The government has scrapped the foreign portfolio investment
limit and lowered interest rates... And this continues to boost
market sentiment," Naotake Ikeda, sales and business director of
Asian Development Securities said yesterday.

Minister of Finance Mar'ie Muhammad lifted a 49 percent limit
on foreign ownership in listed firms on the Jakarta bourse
Thursday.

Meanwhile, a JSX management director Achmad Daniri said
yesterday the 49 percent limit remained effective for the shares
of banks and securities companies.

There are 26 banks and one securities company, PT Lippo
Securities, listed on JSX.

Daniri argued the two sectors were not included in the new
decree because they were governed by a higher level ruling.

He said that based on the existing Bank Indonesia law and
presidential decree, the maximum foreign ownership in banking and
securities firms would be maintained at 49 percent and 85 percent
respectively.

"The assumption is that the (old) regulation of a 49 percent
foreign ownership limit was based on a finance ministry decree.
Although this has been revoked, we still have other regulations
(covering banks and securities firms) which are higher," he told
AFX-Asia.

But most securities analysts said they welcomed the
government's move, calling it "the right momentum" amid the
weakening market condition in the stock market over the past two
months.

Mashil Jaya Securities' vice president, Tjandra Kartika, said:
"The new reforms have sent positive sentiment to the market. We
appreciate the government's political will to do that.

"Local investors welcome the measures with joy with an
expectation that foreign investors will follow the bandwagon," he
said.

An analyst, who declined to be named, warned that the
abolition of the 49 percent limit would affect the market in the
long-term.

"If liberalization leads to foreign investors' domination of
the market, the exchange may collapse if a crisis like the one
over the last three weeks happens again," he said. (aly)

Currency -- Page 11

Debt -- Page 12