Weak rupiah, political tension send stocks tumbling down
Weak rupiah, political tension send stocks tumbling down
The Jakarta Post, Jakarta
Jakarta shares plunged on Friday amid lingering worries of the
sharp depreciation in the value of the rupiah against the U.S.
dollar and rising political tension ahead of next month's
presidential election.
The Jakarta Stock Exchange Composite Index fell by 2.9
percent, or 21.105 points at 697.937, which was slightly higher
than its intra-day low of 689.536.
Falls led gainers 87 to 14, with 57 stocks unchanged. Volume
was at 1.3 billion shares valued at Rp 1.3 trillion (US$137.57
million).
Traders said that foreign investors sold shares heavily after
the rupiah tumbled to around Rp 9,540 per dollar at one point
during the day. Suspected central bank intervention managed to
lift the local unit, and closed at Rp 9,465, little changed from
Wednesday's close of Rp 9,470. The local financial market was
closed on Thursday for a public holiday.
The rupiah has been the worst performing currency in the Asia
region, falling by around 11 percent so far this year. A sharp
drop in the value of the rupiah would hurt companies as it would
be more expensive to import raw materials and costly to repay
maturing foreign debts.
Concerns over the domestic political situation, high global
crude oil prices and losses in many Asian markets after Wall
Street's fall overnight added to the negative sentiment.
"There was heavy selling," said a trader with Paramitra
Securities as quoted by Dow Jones.
"Some investors may be thinking it's time to play it safe and
switch out of Indonesian assets," Paula Komarudin, who helps
manage the equivalent of $1.1 billion in assets at PT Manulife
Asset Management, was quoted by Bloomberg..
Bluechip telecommunications firm PT Telkom and bank shares led
the Friday fall in the local stock market, the fourth consecutive
drop this week.
Telkom, the country's largest telecom firm and the largest
counter in the exchange, dropped by 5.5 percent, or Rp 400 to Rp
6,850 per share. Telkom had a $424.3 million debt in US dollars,
more than a third of its total debt.
Meanwhile, Bank Mandiri, the largest bank in the country,
plunged 6.3 percent, or Rp 75 to Rp 1,125.
Dealers attributed the selling of banking shares to the
central bank's plan to increase the reserves requirement for
commercial banks to defend the rupiah.
In addition to economic factors both at home and overseas, the
rupiah has been badly affected by rising political tension at
home as the month-long campaign for the country's first direct
presidential elections began on Tuesday, resulting in worries
about possible clashes among political supporters.
Nervous companies continued to buy dollars on fears the local
unit would continue to decline amid the political uncertainty.
"Local companies continued amassing dollars as they expect the
rupiah to remain under pressure ahead of the July presidential
election," a dealer said. "Bank Indonesia seems to be the main
dollar supplier today."