Share prices on JSX likely to remain volatile<\/p>\n
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
\nare expected to remain volatile this week due to continued
\nuncertainty over rupiah and other Southeast Asian currencies,
\nsecurities analysts and dealers said.<\/p>\n
They said the sharp rise in interest rates would dampen
\ntrading impetus in the stock exchange as investors would shift
\ntheir investment to bank deposits, which would offer higher
\ngains.<\/p>\n
Some analysts estimated stock trading would be even worse this
\nweek, due to the rate woes and the rupiah's uncertain direction.<\/p>\n
The rupiah fell to an historic low of 3,045 against the dollar
\nTuesday last week following the central bank's move to lift the
\nintervention band.<\/p>\n
The rupiah, however, recovered slightly after the central bank
\nsharply raised the short-term interest rates. The currency rose
\nto 2,670 against the greenback Thursday before stabilizing at
\n2,700 Friday.<\/p>\n
Other Asian currencies including the Thai baht, Malaysian
\nringgit and Singapore dollar also declined Friday last week after
\nthe rupiah's fall.<\/p>\n
Rupiah and other Southeast Asian currencies have been under
\nsevere pressure from speculators following the de facto
\ndevaluation of the Thai baht on July 2.<\/p>\n
Martin Panggabean, an economist from Lippo Securities, told
\nThe Jakarta Post that although the rupiah had recovered slightly
\nagainst the dollar, it did not mean the currency had stabilized
\nagainst the American greenback.<\/p>\n
\"I don't think the rupiah has stabilized against the dollar...
\nbut it will probably take three to four months to stabilize,\" he
\nsaid.<\/p>\n
He predicted the rupiah would reach its equilibrium level of
\n2,700\/2,800 in the next few months.<\/p>\n
As a result, he said, nobody expected the stock market to gain
\nground given the rupiah's current turmoil.<\/p>\n
The central bank increased the interest rate of its short-term
\npromissory notes (SBIs) by several percentage points to shore up
\nthe rupiah.<\/p>\n
Martin even expected the government would raise the reserve
\nrequirement in coming weeks as part of their tight monetary
\npolicies, saying the increase in the short-term rates would not
\nbe enough to further rescue the falling rupiah.<\/p>\n
\"I won't be surprised if the government raises the reserve
\nrequirement in coming weeks,\" he said.<\/p>\n
\"The government might increase the reserve requirement to 8
\npercent or 10 percent in coming weeks,\" he said.<\/p>\n
The government has increased the reserve requirement to 5
\npercent from 2 percent since August last year.<\/p>\n
Securities analysts estimated that bank stocks would be the
\nworst hit in the current tight monetary situation.<\/p>\n
The analysts said American-based Standard & Poors' decision to
\nrevise the rating outlook on some Indonesian banks would further
\nhit bank stocks.<\/p>\n
Standard & Poors downgraded the rating outlook for Bank Negara
\nIndonesia (BNI), Bank Danamon and Bank Umum Nasional to negative
\nfrom stable.<\/p>\n
The rating agency said the outlook revision reflected its
\nexpectation that both the asset quality and profitability of
\nIndonesia's banking sectors would weaken due to the rupiah's
\ndepreciation against the American greenback.<\/p>\n
Moody's Investor Service said Saturday the rupiah's
\ndepreciation in the Indonesian currency market had so far not
\naffected the country's banks and they did not require a ratings
\nreassessment.<\/p>\n
Moody's said the only serious threat to bank ratings stemmed
\nfrom deteriorating credit quality resulting from borrowers'
\nunhedged foreign currency liabilities or an economic slowdown.<\/p>\n
\"Until the exchange rate settles, it is premature to assume
\nthat credit quality will deteriorate so badly as to require a
\nreassessment of Moody's ratings,\" Reuters reported.<\/p>\n
Martin Panggabean told the Post the stock market decline over
\nthe past weeks was understandable due to rupiah scarcity in the
\nmarket.<\/p>\n
\"How can people buy stocks if they do not have money in their
\nhand?\" he asked.<\/p>\n
He said some investors had even sold some of the shares they
\nheld to get fresh rupiah.<\/p>\n
\"People converted their shares into the rupiah to have cash,\"
\nhe said.<\/p>\n
The JSX composite index tumbled 43.03 points, or 7 percent, to
\n574.395 points last week, the lowest close since Nov. 1.<\/p>\n
Daily turnover averaged 488.60 million shares last week from
\n299 million shares the previous week.<\/p>\n
Average daily value rose 60 percent to Rp 758.48 billion
\n(US$275.81 million) last week from Rp 474 billion the previous
\nweek.<\/p>\n
Dealers said share prices declined sharply by 4.8 percent on
\nFriday last week, the biggest single-day drop, to close at 574.39
\npoints on weakening sentiments in banking stocks.<\/p>\n
They said the JSX composite index recorded its peak on July 7
\nwhen it reached 742.95 level before speculative attacks on the
\nrupiah began.<\/p>\n
Most blue chips declined last week with state-
\ntelecommunications firm PT Telkom sliding Rp 50 to Rp 3,400 while
\nIndosat gained Rp 100 to Rp 7,175, Cigarette maker HM Sampoerna
\nwas unchanged at Rp 7,675 and its competitor, Gudang Garam, fell
\nRp 400 over the week to close at Rp 8,900.<\/p>\n
Bank Negara Indonesia shed Rp 50 to Rp 1,150 while Bank
\nInternasional Indonesia lost Rp 100 to Rp 1,100. (aly)<\/p>",
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