FOCUS-Jakarta stocks leap, rupiah steady on reform
(Updates with market closing details)
By Mantik Kusjanto
JAKARTA, Feb 2 (Reuters) - Indonesia's markets on Monday gave an initial thumbs-up to the country's economic reform plans, with stocks ending over 14 percent higher and the rupiah steady on the first trading day after a long holiday break.
The markets also benefited from a regional uptrend in the post-holiday enthusiasm after Thailand scrapped its two-tier currency system Friday and South Korea's debts were rolled over.
Foreign traders returned to the Jakarta stock market on Monday, helping the composite index leap through the 500-point barrier to end the day at 554.11 points, up 14.03 percent.
Brokers said foreign and domestic players appeared to have been encouraged by the progress of economic reforms and moves to deal with corporate foreign debt announced last Tuesday, which also held the rupiah steady.
Spot rupiah rose to a high of 10,000 from an opening of 10,100/10,400 before easing back to a day's low of 10,700. It later recovered to end in Jakarta at 10,300.
Indonesia last week set up an Indonesian Bank Restructuring Agency (IBRA) to rehabilitate unsound banks and also announced guarantees to all depositors and creditors of locally incorporated banks.
Currency dealers said central bank intervention between 10,300 and 10,600 in Singapore and Jakarta helped encourage the market's perception that the bank was guarding the rupiah.
They said an uptrend in regional currencies had also improved rupiah sentiment.
''I think that the market is assuming the best possible outcome for Indonesia as regards its economic fortunes,'' William Keeling, senior advisor at Dresdner Kelinwort Benson, said.
''However much remains in doubt as the hard task of restructuring and recapitalising the banking sector has yet to begin,'' Keeling told Reuters.
''The market also appears to be supposing that foreign banks will happily restructure Indonesia's corporate debt which may be an optimistic scenario,'' he said.
Andre Cita, associate director of PT Bahana Securities, said many foreign investors had returned to the market on Monday.
''A lot of foreigners just see the market is very cheap and the reforms (announced last Tuesday) were a very big step in the right direction. A lot of buying is coming in from foreign houses, at least they dominated buying,'' Cita said.
''The more the commitment you see, the better the market will respond, of course. If you get some short term debt relief that is going to help,'' he said.
Former finance minister Radius Prawiro, appointed by Suharto to find ways of dealing with the private sector foreign debt estimated at around $66 billion, said on Saturday he was confident sweeping economic reforms would boost confidence and stabilise the rupiah.
Prawiro flew to Tokyo on Saturday to meet bankers and find out which Japanese banks would join a group of lenders to help work out the private corporate debt issue.
A number of other European, U.S. and Singapore banks are already members of a Standing Committee to negotiate with a borrowers' Contact Committee being set up in Jakarta on the debt.
Prawiro said a framework would have to be worked out, and decided upon, by creditors and debtors, on a voluntary and case-by-case basis, with the cardinal principle that all corporations must meet their obligations.
He said those in a position to service their debt must do so, while those that cannot service their debt must regularise their financial arrangements with their creditors.
International rating agencies had downgraded Indonesia to junk bond status due to the prolonged currency crisis.
''The sooner we get things sorted out, the sooner we will be able to see the rating services improve their ratings on Indonesia,'' Cita said.
''That is critical for the really big move that can sustain itself for a longer period of time. We need to get that rating back to an investment grade,'' Cita said. |
