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Rupiah Reaches Three-Year Low as Foreigners Sell Stocks, Bonds

Dec. 20 (Bloomberg) -- Indonesia’s rupiah touched a three-year low as foreign funds pull money from stocks and bonds amid forecasts for the nation’s current-account deficit to widen. Equities fell to an 11-week low.

Overseas investors sold $51 million more local stocks than they bought this month and reduced their government debt holdings by 430 billion rupiah ($44 million), exchange and finance ministry data show. The shortfall in the current account may be 2.3 percent of gross domestic product this quarter, which would be the most since Bloomberg began compiling the data in 1997, the central bank said on Dec. 11.

“The rupiah will tend to weaken as long as the current-account deficit continues, which drives strong demand for dollars,” said Mika Martumpal, a currency analyst at PT Bank CIMB Niaga in Jakarta. “Considering the slowdown in capital inflows recently, the rupiah will stay near 9,700 through year-end.”

The rupiah fell 0.1 percent to 9,655 per dollar as of 4:01 p.m. in Jakarta, according to prices from local banks compiled by Bloomberg. It declined by as much as 1.1 percent to 9,760 earlier, the weakest level since Sept. 29, 2009. The benchmark Jakarta Composite Index, which tracks 459 stocks, lost 0.5 percent to 4,254.82, the lowest level since Oct. 3.

The rupiah has lost 6.1 percent this year, the worst performance among Asia’s 11 most-active currencies after the Japanese yen. Bank Indonesia will remain in the market to guard the local currency, Governor Darmin Nasution said on Dec. 10.

Stock Valuations

One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged at 5.7 percent, compared with 13.2 percent at the end of 2011.

The Jakarta Composite Index has climbed 11 percent this year, poised for its biggest annual gain since 2010. The gauge trades for 15.7 times estimated profit, up from 13.7 at the end of June, according to data compiled by Bloomberg. The MSCI Emerging Markets Index is valued at a multiple of 12.

PT Astra International, the largest company in the composite index by market capitalization, slumped 2.6 percent, the most since Dec. 4, after climbing yesterday to a three-week high. PT Gudang Garam sank 2.7 percent today, taking its drop from a five-month high reached on Dec. 18 to 4.9 percent.

“There have been outflows from the stock market,” John Teja, a director at PT Ciptadana Sekuritas said over the phone. “Foreign funds are realizing gains from the rise in some big-capitalized stocks over the past two weeks.”

The yield on the government’s 7 percent notes maturing in May 2022 dropped two basis points, or 0.02 percentage point, to 5.17 percent, the lowest level since Feb. 15, prices from the Inter Dealer Market Association show.

To contact the reporters on this story: Yudith Ho in Jakarta at yho35@bloomberg.net; Harry Suhartono in Jakarta at hsuhartono@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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