JSX gets wrong signals<\/p>\n
The plunge of the Jakarta Stock Exchange (JSX) by another 23.5
\npoints or 4.1 percent yesterday after a dive of 21 points to a
\nfive-week low last week was blamed by most analysts mainly on the
\nwrong market signals set off by several inconsistencies in
\ngovernment policy over the last few weeks. The 171-point fall in
\nWall Street last Friday and the tension between China and Taiwan
\nalso contributed to the bearish sentiment. But the wrong market
\nsignals seemed to have been the primary factor that has prompted
\nmany foreign fund managers, who usually account for over 75
\npercent of the market's trading volume, to reduce their portfolio
\nof Indonesian stocks.<\/p>\n
Obviously the new automobile industry policy, which was
\nannounced late last month, was repeatedly cited as the most
\nflagrant policy inconsistency. The way the supposedly well-
\nintended national automobile program was devised was seen by most
\nanalysts and car assemblers as discriminative. PT Astra
\nInternational, the only car company listed on the JSX,
\npredictably tumbled by more than 12 percent and since the
\ncountry's largest automobile assembler is one of the largest
\ncompanies listed on the JSX, the impact of the Astra fall on the
\nJSX index was quite significant.<\/p>\n
Nonetheless, one may still wonder why many other big cap
\nstocks not related to the car industry also came under strong
\npressure. The answer, we think, lies in the perception that the
\nimplication of an abrupt policy change in a sector is much
\nbroader than it seems to be.<\/p>\n
Since the car industry policy was announced only a few days
\nafter the government reneged on its pronounced import tariff
\npolicy by granting a 25 percent tariff protection to PT Chandra
\nAsri's olefin center, analysts and investors became jittery. They
\napparently detected an unfavorable trend as the two companies
\nthat are the direct beneficiaries of the policy inconsistencies
\nhappen to be politically-well connected. The trend caused them to
\nwonder \"what is then the guarantee that similarly abrupt policy
\nchanges will not take place in other sectors of the economy?\"<\/p>\n
Unfortunately, too, the policy inconsistencies are occurring
\namid the raging controversy over the required reelection of the
\nJSX directors and commissioners. The Capital Market Supervisory
\nAgency (Bapepam) recently issued a ruling requiring the
\nreelection of the JSX directors and commissioners even though the
\npresent management was elected by the JSX shareholders only last
\nMarch. The controversy arose because the reelection is mandated
\nonly to fulfill the new procedures for the election of the JSX
\nmanagement, as stipulated by the new Capital Market Law.<\/p>\n
The ruling is causing some uncertainty as it signifies that
\nthe highest authority in the JSX does not lie in its
\nshareholders, as it always does in a limited liability company,
\nbut rests with Bapepam, a government agency. Moreover, the reason
\ncited for the reelection of the JSX management is seen by most
\nanalysts as unreasonable and even politically-motivated as it is
\nrelated mostly to procedures rather than to the qualifications
\nand the performance of the directors. Analysts wonder why the
\npresent management is not allowed to conclude its three-year
\ntenure before reelection is conducted according to the new
\nprocedures as stipulated in the law. We don't see any relation
\nbetween the requirement to reelect a new management next month
\nand the efforts to improve the competence and efficiency of the
\nJSX.<\/p>\n
The bearish mood in the JSX over the last 10 days is once
\nagain bringing home a strong message that any policy consistency
\nwill be punished by the market irrespective of whatever reasons
\nare cited by the government to justify such abrupt policy
\nchanges.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/jsx-gets-wrong-signals-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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