FOREIGN EXCHANGE Rupiah falls to Rp 9,000 as panic selling continues

JAKARTA. The rupiah weakened again to break the Rp 9,000 psychological mark against the US dollar on Monday after panic selling by foreign investors continued to dominate the trading activities on the country’s stock market.

Amid global economic uncertainties, investors typically turn to savers or free themselves of risky assets — including the rupiah — to shift to safe havens such as US dollars.

The rupiah declined 3.1 percent to Rp 9,060 to the dollar as of 4 p.m. in Jakarta on Monday, according to prices from local banks compiled by Bloomberg, after touching Rp 9,115 earlier — its weakest level since June 2010. The benchmark stock index tumbled 3.22 percent to a 15-month low of 3,316 at the close of Monday’s trading, minimizing earlier losses of up to 6 percent. That compares with losses across the region of over 1 percent in Hong Kong and Singapore, more than 2 percent in Japan and Malaysia and 5.14 percent in Thailand.

The rupiah has declined 5.9 percent this month as foreign investors, who control more than half of the publicly traded stocks at the Indonesia Stock Exchange (IDX), sold Rp 6 trillion more in shares than they bought during the period.

Bank Indonesia (BI) has vowed to keep buying government bonds from the secondary market using its $124.6 billion foreign exchange reserves as of the end of August to avoid further plunges of the rupiah’s rate and bond prices.

From Thursday to Monday, the central bank bought Rp 2.94 trillion in bonds through an auction, in addition to the regular bond-buying mechanism from the secondary market.

“Bank Indonesia is trying to control the volatility in the market, but it can’t go against the regional trend,” Bank Resona Perdania treasury head Lindawati Susanto said as quoted by Bloomberg. “The regional stocks are down. We have to look at the global economic situation.”

Indonesia’s stock index loss was among the worst in the region so far this month — indicating higher vulnerability to foreign fund outflows, analysts said.

The Jakarta Composite Index (JCI) plunged 13.68 percent throughout September, compared with losses suffered by index gauges in Japan (-2.17 percent), Singapore (-1.65 percent), Malaysia (-2.5 percent), Thailand (-14.67 percent) and Hong Kong (-15.23 percent).

“This is the result of a market controlled by foreigners,” Recapital Securities head of research Pardomuan Sihombing told The Jakarta Post. “Investors need to be rational because the troubles are in the US and Europe. Indonesia’s real economy is doing very well and it is reflected through earnings of the listed firms.”

On a year-to-date basis, the nation’s index gauge remained one of the world’s top performing major stock indexes, as it lost 10.46 percent so far this year compared with 12 to 24 percent losses across the region.

Edwin Sinaga, president director at Jakarta-based brokerage FinanCorpindo Nusa, agreed, saying, “There’s no need to overreact on market movement.”

“Investors are panicking. Foreign investors continue booking a net sell and that makes local investors uneasy. If they keep thinking, ‘Tomorrow the market will fall,’ that could create a perception which could drive the market downward,” Edwin told the Post.