Bearish mood overseas will cloud local market

JAKARTA (JP): Stock trading on the local market will likely languish again this week as most investors, especially from the regional market, will be on holiday to celebrate the Chinese New Year, stock analysts said.

Several regional stock markets such as Hong Kong and Singapore will be closed for three days for the lunar holiday celebration scheduled to fall on Feb. 17.

As a result, trading activities on the country's hammered market will slow, they said.

An institutional sales broker with Trimegah Securindolestari, Vonny Juwono, said "Trading activities will be quiet in the coming week with a strong tendency to slow down."

Stockbrokers said that the daily trading volume in the local beleaguered bourse, which has dwindled to a meager Rp 150 billion compared to Rp 400 billion in boom times, would continue to plunge as the absence of fresh support from the domestic market further dampened market sentiment.

Stock analysts said lingering worries over the political development in the country, coupled with escalating fears of social unrest in the lead-up to the June general election still pose a major problems for foreign investors to reenter the local market.

Bahana Securities Andre Cita's head of sales said "Share prices will remain volatile, moving up and down to follow the trend in other markets."

Mashill Jaya Securities' head of research, Edhi S Widjojo, said that certain domestic investors would take a wait-and-see attitude and watch closely on the progress of the government's economic and political programs to bring the country out of its crisis.

"Things are very unpredictable now, with most investors watching closely on macroeconomic developments, the fate of the rupiah and political events in the country," he said.

Stock analysts said the high interest environment, which the government has pledged will remain in place until uncertainties have abated, would further dampen market sentiment as investors switch to the money market to take advantage of high investment returns in time deposits.

The interest rate on Bank Indonesia one-month promissory notes (SBIs) rose to 37.15 percent on Wednesday last week from 36.59 percent the previous week.

"This high interest climate will kill investor sentiment in the equity market," Edhi added.

The Jakarta Stock Exchange composite price index fell 1.2 percent to 400.55 last week from 405.55 the previous week.

The daily average turnover fell sharply to 198.80 million shares last week compared to 309.6 million the previous week.

The daily average transaction value dropped to Rp 200.96 billion last week from Rp 259.04 billion the previous week.

Financial analyst and currency dealers said the rupiah, which closed unchanged at 8,700 against the U.S. dollar last week, would not improve much despite the increase in the interest rates of SBIs last week.

Dealers said that although other regional markets like Hong Kong and Singapore would be closed for the Chinese New Year this week, the rupiah would not improve as it would futile for the rupiah to gain ground in this dire economic and political crisis.

"If the rupiah strengthens to the 8,000 level, for example, offshore operators will benefit because they will buy the dollar at that level and the rupiah will succumb again," a dealer said.

Currency dealers said that the rupiah was expected to be traded in a range of between 8,500 and 8,800 against the dollar this week. (aly)