Share prices are likely to remain under pressure<\/p>\n
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX)
\nare likely to remain under pressure this week over concerns of
\nheated social and political tensions and uncertainties
\nsurrounding the planned currency board system, analysts have
\nsaid.<\/p>\n
Most stock analysts shared a common view that news reports on
\nsporadic riots and demonstrations in several towns in Java,
\nsparked by escalating prices of basic staples, would thwart
\nmarket sentiment this week.<\/p>\n
"News reports on a sprinkling of demonstrations and riots have
\nkilled the market sentiment already. If similar cases occur again
\nthis week, the bourse will go down further," an analyst with
\nMashill Jaya Securities said.<\/p>\n
The head of research at Pentasena Securities, Mohammad
\nSyahrial, agreed and said that most investors would not make any
\nlong-term investments in the country's financial market now as it
\nwas considered too risky.<\/p>\n
"There is and is going to be no long-term investors staying in
\nthe market if political instability continues to shake the
\ncountry," another analyst said.<\/p>\n
Stock brokers said rioting, political or otherwise, would most
\nlikely cast a shadow on stock trading activities in the local
\nmarket ahead of the presidential election next month.<\/p>\n
Members of the People Consultative Assembly will convene here
\nfrom March 1 to March 11 to elect a president and vice president,
\nwith incumbent President Soeharto widely expected to march
\nsmoothly toward his seventh consecutive five-year term.<\/p>\n
Besides political issues, stock analysts said speculation over
\nwhich rate the rupiah would be pegged against the U.S. dollar,
\nfollowing a government decision to adopt a currency board system,
\nwould also weigh down sentiment on the local stock market.<\/p>\n
"The market knows that Indonesia will surely adopt the
\ncurrency board system to stabilize the rupiah, but the market is
\nnow waiting to see at what level the rupiah will be pegged,"
\nPentasena's Syahrial said.<\/p>\n
Syahrial, like most other analysts, anticipated that the
\nrupiah's exchange rate would be set at about 5,000, the level the
\ngovernment set in the revised 1998\/1999 budget.<\/p>\n
Another stock analyst said a short-term impact of the
\nimplementation of a currency board system would be raising bank
\ninterest rates, which would in turn dampen further business
\nactivities.<\/p>\n
"When the system is implemented, many more banks will likely
\ncollapse," said the analyst who asked for anonymity. He said only
\nthe most efficient banks with prudent management would survive.<\/p>\n
"The currency board system is just another indirect instrument
\nto scrap weak banks in Indonesia," the analyst said.<\/p>\n
However, the International Monetary Fund (IMF) and the World
\nBank strongly oppose Indonesia's proposal to introduce such a
\nsystem.<\/p>\n
IMF Managing Director Michel Camdessus reportedly sent a
\nletter to President Soeharto arguing against a currency board
\nsystem which would tie the rupiah to a fixed exchange rate.<\/p>\n
Despite such international concerns, President Soeharto has
\nsaid that Indonesia will adopt the currency board system as it is
\nthe best and least-risky alternative for the country to stabilize
\nthe rupiah.<\/p>\n
Analysts said the market was practically dull last week, but
\nwould likely recover after the government announced the rupiah's
\nexchange rate against the U.S. dollar under a currency board
\nsystem.<\/p>\n
The JSX Composite Index closed 16.29 percent lower to 448.15
\npoints last week from 535.42 the previous week.<\/p>\n
The daily average turnover last week was 786.86 million shares
\non the regular market against 789.62 million the previous week.<\/p>\n
The daily average value totaled Rp 829.66 billion (US$101.17
\nmillion) last week from Rp 791.61 billion the previous week.<\/p>\n
Most blue chip stocks ended lower last week with state-owned
\ntelecommunications firm PT Telkom sliding Rp 1,075 to Rp 3,200
\nand Indosat falling Rp 4,800 to Rp 12,000.<\/p>\n
Cigarette maker HM Sampoerna fell Rp 125 to Rp 5.500, and
\ncompetitor Gudang Garam dropped Rp 4,725 to Rp 9,475,<\/p>\n
Bank Negara Indonesia (BNI) was down Rp 50 to Rp 550, Bank
\nInternasional Indonesia (BII) Rp 75 to RP 500 and the country's
\nlargest automaker Astra International was down Rp 275 to Rp
\n1,600. (aly)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/share-prices-are-likely-to-remain-under-pressure-1447893297",
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"sponsor": "Okusi Associates",
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