Gloomy outlook for rupiah, stocks, experts say<\/p>\n
Dadan Wijaksana, Jakarta<\/p>\n
The stock index and rupiah are expected to remain under pressure
\nin the coming weeks, clouded by negative sentiment stemming from
\nthe prospects of global interest rate increases.<\/p>\n
An analyst said on Sunday that with the signs of a U.S.
\nbenchmark rate hike already apparent, stock markets worldwide
\nwould be the first to bear the brunt, even more so in the case of
\na nation like Indonesia with lingering domestic economic problems
\nand political uncertainty in the run-up to the July 5
\npresidential election.<\/p>\n
"The upward movement in global capital markets will become
\nstalled and we are likely to see a downward trend. Indonesia will
\nlikely be hit even harder because of election concerns," Dandossi
\nMatram told The Jakarta Post.<\/p>\n
Indonesia will hold its presidential election on July 5, with
\na possible run-off between the top two candidates on Sept. 20.<\/p>\n
Dandossi said the imminent rise in U.S. interest rates would
\nmake it less attractive to invest in the stock market as compared
\nto other investment instruments, including bonds.<\/p>\n
"It's time to quit (the stock market) as it is no longer
\nattractive."<\/p>\n
The Jakarta Composite Index closed last week at 692.72 points,
\naround 1.6 percent lower than the previous week's closing, on the
\nback of continued subdued market sentiment and worries over the
\nweakening of the local currency against the dollar.<\/p>\n
Last week's average daily trading volume was 788.68 million
\nshares worth Rp 501.2 billion (US$53.3 million) compared to 1.02
\nbillion shares worth Rp 605.1 billion the previous week.<\/p>\n
Top executives at the U.S. Federal Reserve are scheduled to
\nconvene by the end of the month to discuss interest rates, with
\nanalysts widely predicting a hike of between 25 to 50 basis
\npoints.<\/p>\n
A stock dealer at a Jakarta-based bank also attributed the
\nnegative sentiment to the absence of positive leads in the
\nmarket.<\/p>\n
"With no good news in sight, the market will remain nervous
\nand under pressure," she told the Post.<\/p>\n
The two agreed that what may drive the market was short-term
\nspeculative trading.<\/p>\n
"Practically, it's the bargain-hunting speculators that will
\ndrive the market, as has been the case in recent days," Dandossi
\nsaid.<\/p>\n
Meanwhile, the rupiah is likely also to weaken against the
\nU.S. dollar but within a limited range following the introduction
\nof measures by the central bank to stop the local unit's slide.<\/p>\n
Last week, the rupiah ended slightly weaker at 9,405 per
\ndollar as compared to 9,380 a week earlier.<\/p>\n
Having lost 4.5 percent of its value during May, the local
\nunit has so far depreciated by some 11 percent this year --
\nhigher than the around 7 percent gains it booked throughout 2003.<\/p>\n
The central bank has raised the bank reserve requirement in a
\nbid to absorb excess liquidity and stabilize the local currency.
\nBank Indonesia has said that the excess liquidity in the banking
\nsector had been used to speculate against the local unit.<\/p>",
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