Weak rupiah, fuel hike weaken stock market

Weak rupiah, fuel hike weaken stock market

Dow Jones, Jakarta

Indonesian shares ended lower for the fifth consecutive
session on Tuesday, hurt by the weaker rupiah and the
government's plan to sharply raise fuel prices early next year,
dealers said.

They also attributed selling to news that the central bank
suspended operations at Bank Global Internasional due to its
unhealthy balance sheet and after the central bank said it issued
fictitious loans and securities.

"The news about Bank Global renewed investors' concerns over
banking surveillance," said a banking analyst with BNI
Securities.

The Jakarta Stock Exchange Composite Index ended down 13.711
points, or 1.5 percent, at 922.073, but off a low of 910.994.
Decliners led gainers 101 to 15, with 89 stocks unchanged. Volume
was 1.5 billion shares valued at Rp 1.1 trillion.

Analysts said the weaker rupiah will hurt many Indonesian
companies with significant dollar-denominated debt, while higher
fuel prices will inflate their operating costs.

Cigarette maker Hanjaya Mandala Sampoerna led the decliners,
falling 3.9 percent to Rp 6,150, while rival Gudang Garam lost
1.9 percent to Rp 12,700 on expectations that higher fuel prices
will hurt sales.

Bellwether Telekomunikasi Indonesia fell 2 percent to Rp 4,600
and Indosat dropped 4.5 percent to Rp 5,350.

Dealers said they expect the market to trade lower on
Wednesday on a further correction ahead of the Christmas and New
Year holiday.

The government has said it would raise fuel prices, probably
between early February and April.

Meanwhile, the rupiah closed lower for the third consecutive
session on Tuesday due to rising demand for dollars from local
companies looking to settle their offshore obligations by the
year-end.

The dollar finished at a 16-week high of Rp 9,335, up from its
close on Monday of 9,285.

Demand for dollars is typically robust toward the year-end as
local companies repay maturing offshore debts. Local companies
are saddled with around US$60 billion in offshore borrowings.

Repatriation of profits by subsidiaries of multinational
corporations at the end of the year usually also helps boost
demand for the U.S. currency.

Dealers also attributed the rupiah's fall to reports that the
central bank has temporarily suspended the operations of Bank
Global Internasional.

Dealers expect the dollar to trade between 9,300 and 9,375 on
Wednesday.