Stocks up, rupiah strengthens

Tue, 03 Feb 1998, 00:00 WIB | Source: JP

JAKARTA (JP): Bullish trading returned to the Jakarta Stock
Exchange yesterday, with the Composite Price Index surging 14
percent in active trade.

In the foreign exchange market, the rupiah also maintained its
strengthening performance to close at 10,300 against the U.S.
dollar after almost reaching 11,000 in midday trading.

Stockbrokers attributed the active trading to the return of
foreign investors and a rally in other regional markets.

The government's macroeconomic and banking reform programs
brought a fresh wind to the country's ailing stock market, the
analysts said.

"Some foreign investors have come to test the market and local
investors have followed suit," one broker said, describing
yesterday's bullish trading.

"I think overseas players have realized that reforms announced
by the government early last week will bring the Indonesian
economy back on track," a broker with a local securities house
said.

"Some foreign investors have considered the local market to be
very cheap and have started to enter it again," he said.

Investors believed that the new economic measures, including a
temporary halt in the payment of mounting corporate foreign debt,
would allow publicly listed companies room to breath.

"This is absolutely positive to their performance," he added.

Indonesia has external debts totaling US$140 billion as of the
end of 1997 with the private sector's share at $66 billion.

The JSX's Composite Price Index rose 68.16 points or 14
percent to close at 554.10 yesterday with 813 million shares
changing hands on the regular market valued at Rp 835.39 billion
($85.24 million).

The brokers said most big foreign brokerage houses, which had
stayed away from the local market due to rupiah volatility over
past few months, bought selected blue chip and second line stocks
on a massive scale.

"Most foreign brokerage houses aggressively bought stocks of
blue chip companies with strong fundamentals and dollar-based
earnings," one broker said.

The head of sales at BZW Niaga Securities, Adnan Tan, told The
Jakarta Post that U.S. and European investors were looking to
benefit from the low price of local stocks, helping increase
stock prices as trading picked up.

"A lot of hot funds from the United States and Europe poured
into the region, including Indonesia, for cheap stocks. That is
the main reason for the price increase," he said.

He warned, however, that these foreign fund managers would not
stay long in the region as there had not yet been a significant
change in the region's economic fundamentals.

"Market confidence has improved but it has not recovered yet.
Fundamentally, there hasn't been a change yet in the region's
economy," he said.

The head of research at Pentasena Securities, Mohammad
Syahrial, said the increase in stock prices did not necessarily
reflect the recovery of investor confidence in the local market.

"The bullish market like today (yesterday) will last for one
week or two. After that, it will go down again because most
people are remaining cautious with the local market," he said.

As stock prices increased, the rupiah remained stable against
the American dollar yesterday with modest trading, currency
dealers said.

The rupiah closed at 10,300 against the U.S. dollar yesterday
after falling to 10,400/10,700 during midday trading from a
9,700/10,400 opening in the morning trading session.

Currency dealers attributed the steady rupiah to the central
bank's repeated intervention in the market to prevent the
currency from falling further.

"The central bank was seen in the market selling a limited
amount of dollars for rupiah," a dealer with a local private bank
said.

Dealers said the central bank stepped in to the Singapore
market when the rupiah was at the 10,600 level and in Jakarta
when it hit the 10,500 level.

Another chief dealer with a state bank said overseas players,
especially from Singapore and Hong Kong, were not very active in
the market yesterday, causing the rupiah to remain steady against
the American dollar.

"The central bank's intervention was the main reason for the
steady rupiah yesterday," a chief dealer with a local private
bank said. (aly)