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Indonesia Keeps Stock Exchange Closed


Indonesia closed its stock exchange for the second day to halt a flurry of selling that sent the main stock index plummeting more than 20 percent this week, while Asian trading ended mixed. VOA's Nancy-Amelia Collins has more from Jakarta.

Trading on the Jakarta Stock Exchange was canceled for a second straight day and officials say it may stay closed for the remainder of the week.

Stock exchange president Erry Firmansyah said it will remain closed to give investors a chance to "calm down before they make decisions."

Indonesia's benchmark composite index has dropped more than 20 percent this week, driven by the financial turmoil in the United States.

Traders attributed the fall to selling by major foreign investors.

Fauzi Ichsan, senior economist at Standard Chartered Bank Indonesia, says the global financial crisis is likely to impact only Indonesia's stock market and currency.

"I think it would affect the real economy for example, if the equity market continues to tank and foreign investors continue to sell their Indonesian shares," he said. "And with the rupiah they get they change to dollars, and the rupiah becomes under pressure, the rupiah tanks, and imported inflation accelerates, and therefore headline inflation also accelerates, then that would hit the real economy."

But Fauzi says the economic impact of the global economic crisis is likely to be limited in Indonesia.

"As long as the fall, the weakening of the equity market is confined to the so called economic elite of Indonesia, the impact on the real sector, on the real economy is negative, but it is likely to be limited compared to similar impact in the U.S," he said.

The central bank senior deputy governor Miranda Goeltom said the government may extend a guarantee on deposits, similar to moves made by other countries.

The plunge in the stock markets Wednesday prompted coordinated rate cuts by central banks in Europe, the United States, the Britain, Canada, and China in an attempt to stave off a global recession.

Central banks in South Korea and Taiwan also cut their rates hoping to rally Asian shares.

But trading on Asian markets ended mixed with the Hang Seng in Hong Kong closing with a gain of more than three percent and Seoul's index trading higher, but markets in Japan, Taiwan, Manila, Sydney, and Wellington fell.

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