Stock prices, rupiah continue to weaken<\/p>\n
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX)
\nclosed marginally lower yesterday on increasing concern about a
\nfurther decline in the rupiah against the American dollar.<\/p>\n
The JSX Composite index closed 4.33 points down at 394.28 as
\nthe rupiah broke through the psychological level of 3,800.<\/p>\n
Head of research of Pentasena Securities Mohammad Syahrial
\nsaid that the persistent decline in stock prices was caused by a
\ncombination of higher interest rates, the persistent fall of the
\nrupiah against the American dollar, and the bleak outlook of
\ncorporate earnings this year and next year.<\/p>\n
"Political uncertainties in the face of the upcoming General
\nAssembly meeting to elect new president and vice president in
\nMarch add to the negative sentiment in the market," he said.<\/p>\n
He said most foreign investors, who previously accounted for
\nabout 70 percent of transactions in the JSX, had long stayed out
\nof the market and would possibly reenter it again in the second
\nsemester of 1998.<\/p>\n
"I think most foreign investors will possibly reenter the
\nmarket at the earliest in the second semester next year," he
\nsaid.<\/p>\n
He said that the monetary crisis would affect corporate
\nearnings in 1998.<\/p>\n
"According to our assessment, most companies will record an
\naverage 5 percent decline in net profit next year compared to
\ntheir earning performance in 1996," he said, adding that
\ncorporate earning in 1996 was good.<\/p>\n
"Most foreign investors have left the market and switched to
\ninvesting in Asian bonds," he said.<\/p>\n
Stock analysts said poor earnings expectations due to foreign
\nexchange losses and fears of a prolonged economic slowdown
\ncontinued to batter the stock market sentiment.<\/p>\n
As stock prices lost ground, the rupiah remained weak against
\nthe U.S. dollar yesterday on a contagion effect of the weakening
\nof regional currencies.<\/p>\n
"The sharp fall in the (South Korean) won has certainly
\naffected other currencies including the rupiah," a dealer from a
\nlocal private bank said.<\/p>\n
Foreign exchange dealers said the rupiah fell to a day low of
\n3,840 against the greenback yesterday before settling at 3,815\/35
\nat close.<\/p>\n
Currency dealers also attributed the rupiah's fall to rising
\ndemand for the greenback from local companies.<\/p>\n
"Though trading was relatively quiet there is a strong need
\nfor local companies to buy dollars to cover their dollar
\ndenominated debts which are to mature this month," a dealer said.<\/p>\n
This force, he said, prompted the rupiah to weaken against the
\ndollar. (aly)<\/p>",
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