WRAPUP 2-Indonesian shares, rupiah tumble again on economy, US Fed worries
(Adds comment by state-owned enterprises minister on share buy-backs)
* Rupiah hits lowest since end-April 2009
* Stock index falls 5.8 pct, then pares losses
* State pension funds, companies to buy shares
* Some economists expect c.bank to raise rates
By Andjarsari Paramaditha
JAKARTA, Aug 20 (Reuters) - Indonesian shares and the rupiah currency took another hard hit on Tuesday, pulled down for a third day by worries about the economy and the wider malaise sweeping emerging markets on fears that reduced U.S. monetary stimulus will hurt them.
The rupiah fell 2 percent to 10,700 to the dollar, its lowest level since April 30, 2009, while the Jakarta benchmark share index - which at one point had plunged 5.8 percent - shed 3.2 percent for the day.
The rough patch for the currency and stocks started on Friday, the day after a central bank meeting unveiled measures to contain loan growth.
The main trigger for the slides was news, after Friday's market close, that Indonesia's current account deficit had widened more than expected in the second quarter.
This spawned worry that a weak global economy will only further erode exports, with a surge in inflation limiting how much domestic demand can take up the slack.
Some economists said the central bank may be forced to raise key interest rates to try to limit the market rout, which has seen stark comparisons between Southeast Asia's biggest economy and India, whose currency has been falling to record lows.
The benchmark share index had fallen 2.5 percent on Friday and then 5.6 percent on Monday, wiping out its 2013 gains.
At the end of Tuesday, the index was at 4,174.98, which is 20 percent below a peak touched on May 21.
One factor in the late day loss-paring was buying of shares by state-linked institutions, signalling how concerned the government is to prevent the market falls from turning into a full-blown crisis.
The central bank said it had been intervening in the rupiah and bond markets to stabilise prices and would continue to do so.
The heads of Indonesia's two main state pension funds separately told Reuters they were planning to buy shares.
"We see no fundamental issues for listed companies and stock prices are considered cheap now," Elvyn Masassya, the chief executive officer of PT Jaminan Sosial Tenaga Kerja (Jamsostek) said.
In comments to Reuters after the market had closed, State-owned Enterprises Minster Dahlan Iskan said he had instructed state firms to buy back their shares directly from the market. There are some 21 state firms listed on the Jakarta stock exchange, including some of Indonesia's biggest companies.
One foreign brokerage executive said that the finanial services regulator had called a meeting on Tuesday afternoon to seek advice on "how to help and manage the current slide in the market".
One stock that reversed course in the afternoon and ended higher was state-controlled lender PT Bank Mandiri. At midday, it was down more than 7 percent to a one-year low, but it closed up 2 percent at 7,800 rupiah.
WANING INVESTOR ENTHUSIASM
The latest falls, which have also hit the government bond market, coincide with waning investor enthusiasm for Indonesia's economy, which has been one of the world's fastest growing.
But its potential is being undermined by the downturn in some of its major export markets and also a perception that the government of President Susilo Bambang Yudhoyono has failed to be decisive in policy-making.
The government finally agreed to a sharp cut in costly fuel subsidies in late June, after months of delay, and just before the Muslim fasting month, one of the most inflationary periods of the year. The timing, combined with mis-steps over imports of basic foods, added to rising costs.
By July, annual inflation had surged to its highest in 4-1/2 years at 8.61 percent. Officials insist that both inflation and the current account deficit will start to come down.
Josua Pardede, an economist at Bank Internasional Indonesia in Jakarta, said the central bank may move to increase its overnight deposit facility, or FASBI, rate to ease some pressure on its markets.
Last week, Bank Indonesia (BI) left its benchmark and the FASBI unchanged but tightened the loan-to-deposit ratio for banks and its secondary reserve requirement in the hope of cutting into inflation without hurting already slowing growth.
"BI's only ammunition left is the FASBI, primary reserve requirement and the BI (benchmark) rate. The fastest solution to calm the market is the FASBI," Pardede said. "The primary reserve will take time to adjust and if BI raises its benchmark rate, it will hurt the economy." (Affiditional reporting by Fathiya Dahrul and Janeman Latul; Writing by Jonathan Thatcher; Editing by Richard Borsuk and Ron Popeski)
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