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Local stocks and the rupiah slumped in unison with other
markets in the region Monday, with continued speculation of further
interest rate hikes coupled with falling commodity prices triggering a
sell-off of Asian holdings by global investors.
The Jakarta Stock Exchange Composite Index plummeted 83.945 points, or
6.03 percent, to a two-month low of 1,309.04 on heavy selling, driven
further by negative sentiments of a weakening rupiah.
The rupiah closed down 1.4 percent to Rp 9,330 to the U.S. dollar, from
Friday's 9,200 level, continuing a more than 5 percent decline from
last week.
The local bourse started the day by plunging nearly 2 percent, taking a
short breather during the mid-day break, only to extend its losses in
the afternoon session.
The main index fell 8.7 percent last week -- its biggest weekly drop
since July 2002 -- losing more than 20 percent of gains from this year.
The day's trading -- on a volume of 3.24 billion shares valued at Rp
2.85 trillion (some US$306 million) -- was dominated by the dumping of
shares, induced by similar moves in the region. Decliners led advancers
159 to 4, with 31 stocks unchanged.
Losses in Asian markets were led by India's benchmark Sensex Index,
which plunged 10.2 percent and had to halt trading on doubts of the
market's fund liquidity. Hong Kong's Hang Seng Index fell 3.1 percent,
followed by Seoul's KOSPI index (2.4 percent) and Tokyo's main Nikkei
225 index (1.84 percent).
Fears since last week that the U.S. Federal Reserve may continue hiking
its key rate on higher inflation data may push other central banks to
follow suit in keeping parity, fostering negative sentiment of higher
borrowing costs and lower consumer demand toward prospects of listed
companies.
Jitters in global commodity prices, particularly metal and staple food
products, compounded the day's downward sentiment.
Local mining shares took the hardest blow during the day, as metal
prices followed gold's global decline. State miner PT Aneka Tambang
plunged 17 percent to Rp 3,975, followed by state tin producer PT
Timah's 8.6 percent fall to Rp 1,850.
Major selling by foreign investors exchanging their holdings for the
U.S. dollar put the rupiah under pressure again.
The rupiah's outstanding gains for the year have been whittled to only
6 percent from the previous 10 percent due to last week's losses.
Bank Indonesia Senior Deputy Governor Miranda S. Goeltom said she
believed calm would return to the markets soon as the central bank
continued to implement policies to maintain local monetary stability.
"We still have to be careful so that we do not make the wrong moves
that could make things worse. We expect the market can see credibility
in our monetary (strategy) and the government's fiscal policies, so
things can stabilize again."
She said the current BI rate was still sufficient to make rupiah assets
attractive and that there was still room to lower it again as inflation
eased further.
The current market volatility could put the credibility of BI's rate
policy at stake if a worsening situation pushes the central bank to
consider cutting rates further from the current 12.5 percent
implemented earlier this month.
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