Stocks, money market under control, says BI official

The Jakarta Post ,  Jakarta   |  Sat, 08/04/2007 12:37 PM  |  Business

The Jakarta Post, Jakarta

Bank Indonesia expects the recent jitters in the global financial markets will be temporary, and that they will not have too many adverse effects on Indonesia's economy.

Local share prices and the rupiah calmed down Friday from previous volatile trading as market jitters subsided, although they were still under pressure.

The Jakarta Stock Exchange Composite Index closed down 1.06 at 2,269.79, compared to an intraday high of 2,294.73 and low of 2,259.10. For the week, the benchmark index lost 28.61 points, or 1.2 percent.

The rupiah, meanwhile, closed slightly higher at Rp 9,275 to the U.S. dollar, from Rp 9,285 the previous day.

Financial markets across the globe saw widespread fallout Wednesday from a credit crunch in the U.S. subprime mortgage market, which spurred global investors to secure their investments in a short-selling frenzy.

Bank Indonesia spokesperson Budi Mulya acknowledged that the global market volatility was due to a ""rebalancing"" of global portfolio investment instruments, particularly in the U.S. markets, which had then spread to other stock and money markets worldwide, including Indonesia's.

The rupiah was particularly susceptible to such external factors.

However, he said the situation was under control and expected the turbulence to be short lived. Indonesia's sound macroeconomic indicators would also help ensure the resilience of the local economy ahead.

""Our macroeconomic stability is sustained. Take July's 6.06 percent inflation, for example, which is still within our 6, plus or minus 1 percent, range for this year,"" Budi said.

""BI as the monetary authority will assuredly always keep a watch on developments, and do whatever is within its power to ward of worst-case scenarios.""

The rupiah rose after a rally in global stocks spurred speculation overseas investors would resume buying riskier assets.

""Because of the equity markets regaining some foothold in the U.S. and the Asian region, there is some return of risk appetite,"" Ho Woei Chen, a currency analyst at United Overseas Bank Ltd. in Singapore, told Bloomberg.

The currency advanced 0.2 percent to 9,275 against the dollar as of 4:45 p.m. in Jakarta, according to data compiled by Bloomberg. The rupiah lost 0.9 percent this week, and traded at its weakest in more than a year as concerns about the spread of hedge-fund losses linked to U.S. subprime mortgages escalated.

Finance Minister Sri Mulyani Indrawati said early this week that the government wasn't worried about the rupiah's decline because the accelerating economy would attract investors.

Ho at UOB said the currency is unlikely to strengthen beyond 9,200 in the short-term and 9,000 by year-end.

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