Stocks extend losses, rate hike helps rupiah

The Jakarta Post ,  Jakarta   |  Wed, 10/08/2008 10:34 AM  |  Headlines

The Jakarta stock Composite Index continued its fall Tuesday on worries over a deepening global financial crisis, but the rupiah's slide was halted by the 0.25 percent raise in the central bank's key interest rate.

The stock index dropped 1.76 percent to close at 1,619.72 points. On Monday, it dropped by more than 10 percent as fears over the spreading financial crisis triggered panic worldwide.

Tuesday's trading saw 122 stocks down, 36 unchanged and 52 closing higher.

Shares of PT Timah, the country's largest tin producer, and PT Aneka Tambang (Antam) were among the big gainers, rising 12.28 percent and 9.43 percent respectively.

The biggest loser was Indo Tambangraya Mega, the local unit of Thailand's largest coal producer, dropping 8.67 percent to Rp 15,800 (US$1.65) on the back of lower oil prices.

HDX capital analyst Adrian Rusmana said Tuesday's drop proved the negative sentiment was still present, even though the decline was far smaller than Monday's 10.03 percent drop -- the biggest since the 2002 Bali bombings.

Mandiri Sekuritas analyst Ari Pitoyo said the stock market authority's decision to officially suspend trading in shares of PT Bakrie & Brothers and its units helped the stock from falling even further.

But both agreed the central bank's move earlier in the day to raise its key interest rate provided the biggest boost to the local market in dire need of positive sentiment.

Bank Indonesia Governor Boediono said the central bank raised its rate by 25 basis points to 9.5 percent, in part to help support the rupiah after "considering the development of global and domestic economies".

"It is a step to tell the market that BI is consistent in its monetary control strategy," Boediono said, adding BI had also factored in domestic demand, balance of payments and the resilience of Indonesia's financial sector.

On Tuesday, the rupiah traded at 9,570 per dollar at 5:09 p.m. in Jakarta, after touching 9,650 in morning trading, Bloomberg reported. The local currency strengthened slightly from 9,575 per dollar on Monday.

Boediono said BI would keep close watch on the currency, but was not worried about the depreciation.

"BI will always be in the market," he said.

BI foreign exchange reserves stood at US$57.11 billion on Sept. 26, down from $58.36 billion on Aug. 29.

Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said that while the rise in the BI rate had managed to strengthen the rupiah, it could hamper economic growth by forcing banks to increase their lending rates.

In a related development, the government has set up a team to draw up and monitor measures needed to help mitigate the impact of the global turmoil on Indonesia's economy, according to Indonesian Chamber of Commerce and Trade chairman, M.S. Hidayat.

The team brings together relevant ministries, as well as executives from the banking sector and the business community, Hidayat said Tuesday after a meeting with President Susilo Bambang Yudhoyono and his economic ministers at the State Palace.

The measures center on efforts to boost the nation's real sector performance through the gradual easing of the current tight monetary policy environment, exports and investment, Hidayat said.

"This team will work around the clock. No time to relax," he said. "Every day, every week, there has to be progress on the measures we are planning to take."

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