Rupiah slides past 14,000 per dollar
Anggi M. Lubis
The Jakarta Post
President Joko 'Jokowi' Widodo invited Indonesia's top businessmen on Monday to discuss the country's economy as the rupiah and the Indonesian stock market fell further amid the deepening of the global market rout.
In the meeting held at the Bogor Palace in West Java, Jokowi briefed the businessmen about the country's economic problems and promised to try to fix them.
The President did not specifically address the rout in the local financial markets during the two-hour meeting, which was also attended by the governor of Bank Indonesia (BI).
However, State-Owned Enterprises Minister Rini Soemarno was reported to have told state companies to buy back part of their shares to prop up falling prices.
The Finance Ministry also announced earlier in the day its plan to buy back treasury notes in an effort to calm investors amid the current financial turmoil.
The rupiah passed the significant 14,000-mark against the US dollar for the first time since the 1998 financial crisis on Monday as the Jakarta Composite Index (JCI), the main price indicator on the local stock exchange, lost almost 4 percent to close at 4,163.73 as frenzied trading occurred tracking the heavy selling pressure in other Asian markets.
KDB Daewoo Indonesia's Taye Shim predicted that the fall in local share prices was likely to continue as worries over the global economic slowdown would cast a shadow over stock trading.
Agus Yanuar, president director and head of investment at Samuel Aset Manajemen, said the local market would remain in a bearish state of mind for the next few days.
'Hopefully the bottom [for the JCI] will be at 4,050. Though there's a possibility for the index to dive below the psychological level [of 4,000] if the US market falls further,' he said, while adding that the key would be the government's infrastructure program.
Almost all Asian stocks plunged as the rout in global equities deepened on fears over the deterioration of the global economy. Southeast Asian benchmarks, other than Indonesia's JCI and Malaysia's FTSE BM, fell by more than 4 percent on Monday.
The Philippine main index ended the day down 6.7 percent, its biggest loss since June 2013, erasing all its gains for the year and turning to a year-to-date (ytd) loss, Reuters reported.
Vietnam closed down 5.3 percent, its biggest loss since May 2014, taking its fall so far this year to 3.4
percent, while the Thai SET index shed 4.7 percent and Singapore's main index plunged 4.3 percent at its day low.
The JCI, now the worst performer in the region, has lost 20 percent of its value ytd as investors have dumped investments in emerging markets amid gloomy economic updates and global concerns, which included the possibility of a US Federal Reserve interest hike and China's currency devaluation.
Foreign net sales in the Indonesian exchange currently stand at Rp 5.11 trillion ytd, versus a peak of net buys of Rp 15 trillion in April.
The Financial Services Authority (OJK) issued on Friday a letter to allow firms to buy back their shares without the necessity for a prior general shareholders meeting, and media reports quoted OJK commissioner for stock markets Nurhaida saying the regulator was soon to issue other stimulus measures to help calm the markets.
Separately, the Finance Ministry says that it will continue to buy back debt papers from the secondary bond market in an effort to boost investor confidence.
Robert Pakpahan, the director general of the ministry's financing and risk management office (DJPPR), said on Monday that it would enter the market whenever necessary to purchase its debt papers to create demand and halt declines.
'We need to maintain investors' confidence. However, we will enter the market only when necessary because we don't want to overreact, even though the market is in the red,' he said during a discussion with the media.
BI Governor Agus Martowardojo said the central bank was convinced that the rupiah was 'undervalued' at its current level, which meant there was an urgent need for a more coordinated response between fiscal and monetary authorities.
'The rupiah [exchange rate] is already at an overshoot level and we cannot tolerate it for too long. We ask, in particular, exporters to start selling their dollars so as to maintain a more balanced supply and demand as well as to reduce forex pressures,' Agus said on Monday.
- Tassia Sipahutar and Grace D. Aminarti contributed to this story
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