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.