[Antara] 23 January 2008

News:

• Bank Indonesia, the central bank, said Wednesday the latest interest rate cut in the US has eased concerns about the outlook for the world's largest economy. Bank Indonesia said the move is also having a positive impact on the local stock market and the currency, the rupiah. The Fed cut its federal funds rate by 75 basis points to 3.5 percent overnight and signalled that further rate cuts were likely. At midday, the composite index was up 108.84 points or 4.7 percent at 2,403.37, coming off an intraday high of 2,469.33. The rupiah was trading at 9,383/9,388 to the dollar, strengthening from 9,485/9,490 late yesterday. "Of course it (rate cut) is positive in a sense that when we talked about economic outlook yesterday, it was so worrying," said Budi Mulya, the central bank's deputy governor. The stock market and the rupiah have also reacted positively, he told Thomson Financial. Mulya hopes the recovery is sustainable going forward. In the recent stock market selldown, Bank Indonesia had to defend the rupiah in foreign exchange trading against selling by foreign fund managers, he said. "Today, we have seen some improvement," he said.

• Indonesian share prices bounced back 7.5 percent in early trade Wednesday as hopes for a market recovery were revived by a surprise rate cut in the United States overnight, dealers said. The Fed cut its federal funds rate by 75 basis points late Tuesday and signalled that further rate cuts were likely. The Jakarta composite index immediately rose by 150 points shortly after the opening of trading and by 9:45 am, (0245 GMT) it was 171.29 points stronger at 2,465.82. "I think it (the cut) will reduce selling pressure on Wall Street for a while," said Prayoga Triyono, fund manager at Henan Putirai Asset Management. "It is too early to question whether or not the rally will be sustainable as it will very much depend on the consistency of positive news from the US," he told AFP. The market could come under pressure again if at some point people thought that the US economy required more than rate cuts to prevent it from slipping into a recession, he said. The rupiah was at 9,380 /9385 to the dollars around 10:00 am (0300 GMT) compared to the 9,485/9,490 to the dollar at closing Tuesday.