JSX's share prices drop 2.4%<\/p>\n
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
\ndropped by 2.4 percent yesterday.<\/p>\n
Foreign selling pressure was cited, although dealers gave
\ndifferent reasons for the sharp drop.<\/p>\n
The Jakarta Stock Exchange composite index, which had declined
\nbelow its 600 support level on Tuesday, dropped again by 14.57
\npoints to 581.53 at yesterday's close.<\/p>\n
The dealers contacted by The Jakarta Post, shared the
\nassumption that what was happening yesterday was nothing out of
\nthe ordinary as most stocks listed on the JSX were overvalued.<\/p>\n
\"I would say that it's due mainly to the overvalued situation
\nin addition to the inclusion of South Korea and Taiwan into the
\nMorgan Stanley Composite index which had lowered JSX's weighting
\nin the indexation,\" a dealer with a London-based securities
\ncompany told the Post.<\/p>\n
The dealer, who preferred anonymity, rejected the assumption
\nthat fear of another interest rate hike in the United States was
\nthe main reason.<\/p>\n
He also rejected the assumption that the drop was due to
\nforeign fund managers' preparations for the summer holidays.<\/p>\n
\"What I know is that foreign investors made large selling on
\nTelkom and Indosat in the morning session. A decline on the two
\nstocks then triggered a drop of other big caps,\" a senior trader
\nwith PT Sanyo Primarindo, Najdib Usman, said.<\/p>\n
\"But most of all, I would say it's a cyclical situation that
\ncan happen when share prices already went up to high,\" he told
\nthe Post.<\/p>\n
A dealer at PT Peregrine Sewu Indonesia, Chris T., was of the
\nopinion that major selling pressure by foreign investors
\nyesterday was attributable to the decision of Bank Indonesia, the
\ncentral bank, to widen the intervention band of the money market,
\nas well as overvaluing.<\/p>\n
Bank Indonesia yesterday said that it had widened the dollar-
\nrupiah intervention band to Rp 118 or five percent, from Rp 66 or
\nthree percent previously.<\/p>\n
Chris said that foreign investors are cautious on the central
\nbank's move because it gave a negative indication on the
\nIndonesian economy and its country risk.<\/p>\n
\"The widening intervention rate obviously will hinder any easy
\nexit mechanism for short-term oriented investors. On the other
\nhand, they have also found out the JSX's share prices are already
\novervalued. Therefore, they have to take quick actions,\" he said.<\/p>\n
He said that for those two reasons, foreign investors
\npreferred to shift their money to other markets, not to other
\nstocks.<\/p>\n
\"New initial public offerings could be another reason for
\nyesterday's plunge,\" he added.<\/p>\n
He rejected the idea that the MSCI's decision to downgrade the
\nJSX had something to do with yesterday's plunge. He agreed that
\nfear of U.S. interest rate hikes is over.<\/p>\n
Some big caps among the declining stocks yesterday were Telkom
\nwhich closed down by Rp 125 at Rp 3,200, Indosat by Rp 100 at Rp
\n10,250, Gudang Garam by Rp 700 at Rp 9,450 and HM Sampoerna by Rp
\n700 at Rp 26,700.<\/p>\n
Nadjib said that Telkom's fall might be triggered by a plan of
\nDeutche Telkom to list its shares on the New York Stock Exchange
\nnext week, but another dealer said that there was no direct
\nimpact from the plan.<\/p>\n
Chris forecasted that the market's downward trend is likely to
\ncontinue today. (alo)<\/p>",
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