Rupiah, stocks resilient to Friday blasts

Aditya Suharmoko , The Jakarta Post , JAKARTA | Sat, 07/18/2009 11:08 AM | Headlines

The rupiah and Indonesian stocks and bonds proved to be resilient to negative sentiments caused by the almost simultaneous blasts at the Kuningan business district in South Jakarta on Friday.

Data complied by Bloomberg shows the currency slid as much as 1 percent before trading 0.4 percent lower at 10,163 as of 4:37 p.m. The local currency reached 10,075 against the greenback Thursday, its strongest level since June 15.

The Indonesia Stock Exchange (IDX) composite index of shares slumped as much as 2.7 percent at early trading before recouping the bulk of its slide.

Economic ministers and the central bank made a quick response to minimize the impacts of the bomb blasts hurting the economy. The officials expect the negative sentiment to last for a couple days only.

Bank Indonesia deputy governor Hartadi A. Sarwono said the central bank supported the rupiah to regain footing against the greenback.

“We have entered the market. We managed to calm the market so there won’t be sustainable impact,” he said in a press briefing Friday at the Finance Ministry’s Office.

Hartadi said, looking back in 2003 when a bomb blast took place at Marriott, the negative sentiment lasted for a couple days in the market, thus he expected the same pattern would happen now.
Analysts shared the same opinion with the central bank.

“The composite index is quite resilient after the incidents,” Danareksa Research Institute chief researcher Purbaya Yudhi Sadewa said, adding investors might feel hesitant to buy stocks in the next two trading days, but the incidents would not affect the stock market in the long run.

The stock market will be closed on Monday due to a national holiday. It will reopen on Tuesday.

He said investors would return to buying stocks within a week, as the staples of Indonesia’s economy remained strong after peaceful legislative and presidential elections.

“Investors should not be hesitant in buying stocks. The tragedy is a small incident and does not affect the whole country,” said Fauzi Ichsan, senior economist of Standard Chartered Bank.

The second day after the 2002 Bali bombings, stocks rose by 1.4 percent, and the second day after the 2003 Marriott bomb stocks rose 1.21 percent, according to data by Citi Investment Research and Analysis.

Two days after the blast in the Australian Embassy in 2004, stocks rose 1.93 percent. Two days after the second Bali bombings in 2005, stocks also rose 1.64 percent.

The cost of protecting Indonesia’s bonds from default climbed five basis points to 2.87 percentage points on Friday, according to CMA DataVision in Singapore. The contracts rise as perceptions of credit quality deteriorate.

“The weakness will be short-lived,” said Tim Condon, chief Asia economist at ING Groep NV in Singapore as quoted by Bloomberg.

“Markets will recover and if we go for another protracted period without follow-up attacks then markets will forget about it and we will return to the fundamentals.”(nia)