Political woes may foil stocks<\/p>\n
JAKARTA (JP): Stocks on the Jakarta Stock Exchange (JSX) are
\nlikely to remain under heavy selling pressure this week due to
\nthe country's heated political developments and high interest
\nrates, stockbrokers and analysts said.<\/p>\n
They said escalating student demonstrations were likely to
\nignite into violent street clashes in coming days making
\ninvestment risks soar drastically.<\/p>\n
"The country is now facing a political crisis rather than an
\neconomic one," the head of research at Socgen Crosby Securities
\nIndonesia, Goei Siauw Hong, said.<\/p>\n
A stockbroker with BZW Niaga Securities said most foreign
\ninvestors had expressed fear that the country's political
\ninstability would dampen trading activities in the local market.<\/p>\n
"There is no more positive news. Everyone is afraid to put
\ntheir money in the local bourse because of the political
\ninstability," the stockbroker said.<\/p>\n
Hundreds of students and workers continued with their daily
\ndemonstrations last week, protesting the government's decision to
\nraise fuel and electricity prices.<\/p>\n
They demanded the government make rapid economic and political
\nreforms to bring the country out of its worst crisis in decades.
\nThey also demanded President Soeharto to step down after failing
\nto restore investor confidence in the country.<\/p>\n
President Soeharto, however, has threatened to use security
\nforces to crush any unruly student protests in the future.<\/p>\n
"The security forces will take action against whoever disturbs
\nnational stability," the President said before leaving for Cairo
\non Saturday for a summit of the Group of 15 developing nations.<\/p>\n
Most analysts and stockbrokers shared the common view that the
\ncountry's political situation had become so complicated that
\neconomic and monetary moves alone could not effectively
\nstrengthen the economy.<\/p>\n
The head of research at Sigma Batara Securities, Fadjar Limin
\nSutandi, said the worsening political situation would hurt market
\nsentiment.<\/p>\n
He also said the recent move by Bank Indonesia to raise
\nbenchmark interest rates for its short-term promissory notes
\n(SBIs) would create heavy selling pressure in the local bourse.<\/p>\n
The central bank raised its SBI rates again last week between
\n4 percentage points and 12 percentage points to shore up the
\nrupiah against the U.S. dollar.<\/p>\n
One-month SBI rates were raised to 58 percent from a previous
\nrate of 50 percent.<\/p>\n
The rupiah, however, failed to strengthen against the American
\ndollar last week, closing at 9,200 on Friday, much lower than the
\nprevious week's close at 8,200.<\/p>\n
Fadjar said the central bank could further raise SBI rates
\nagain in the coming days to defend the rupiah from plunging
\nfurther against the American greenback since previous increases
\nhad shored up the currency.<\/p>\n
"The market expects the government to raise the one-month SBI
\nrate to as high as 60 percent," he said.<\/p>\n
Analysts said investors would continue to sell their stocks
\nand deposit their funds in banks which offer higher yields.<\/p>\n
Managing director of Harita Securities Christina Lim said the
\nlocal market was far from recovery because foreign investors
\nwould likely stay out of the country due to the political risk
\nfactors here.<\/p>\n
The JSX Composite Index shed 11.87 points, or 2.64 percent,
\nto close the week at 436.65 points from 448.52 the previous week.<\/p>\n
Total average daily turnover fell 3.42 percent to 360.14
\nmillion shares last week from 372.89 million the previous week.<\/p>\n
Total average daily value also declined 17.77 percent to Rp
\n376.67 billion (US$41.58 million) last week from Rp 458.04
\nbillion the previous week.<\/p>\n
Most blue chip stocks ended lower last week with Astra
\nInternational down Rp 275 to Rp 1,225, Gudang Garam Rp 550 lower
\nto Rp 8,650, HM Sampoerna by Rp 675 to Rp 4,325, Bimantara Citra
\nby Rp 275 to RP 650 and Citra Marga Nusaphala Persada by Rp 100
\nto Rp 550.<\/p>\n
Indonesia's financial market was closed yesterday in
\nobservance of Buddha's Day of Enlightenment. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/political-woes-may-foil-stocks-1447893297",
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"sponsor": "Okusi Associates",
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