'Black Monday' as stocks plummet by almost 5%

'Black Monday' as stocks plummet by almost 5%

Rendi A. Witular, Jakarta

The Jakarta stock market fell precipitously for the eighth
straight trading day on Monday as regional stock markets also
plunged on growing fears that the U.S. Federal Reserve would
increase its interest rate in June.

The Indonesian rupiah also weakened against the U.S. dollar,
following losses in other regional currencies amid the Fed's
rate-hike plan and by China's policy to slow the pace of its
overheating economy.

The Jakarta Composite Stock Index plunged 4.89 percent, or
36.419 points to 707.218, on volume of 2.08 billion shares worth
Rp 1.24 trillion (US$138 million). The decline brought it to its
lowest point since Jan. 2.

Heavyweight state-owned telecommunications firm PT Telkom, the
bourse's largest counter with 17 percent of market
capitalization, led the decline of most bluechips by falling Rp
400 to Rp 7,250.

Stock analyst Achmad Amir of DBS Vickers Securities said
concerns over the Fed's rate-hike plan and security problems at
home had weighed on the market and caused excessive sell-offs.

"We can call this our "Black Monday". The decline was abnormal
since investors were overreacting about all the issues, and
dismissing the country's economic fundamentals," said Achmad.

An analyst with state-owned securities house blamed foreign
speculators, who apparently have significant stock portfolios on
the market. He lamented the fact that they were merely trying to
make a profit by investing in the stock market.

"I think it is just speculators by certain (South East Asian)
regional investors. Our market is so fragile because they make up
50 percent of the transactions at the bourse," the analyst said.

Meanwhile, the U.S. Federal Reserve may raise interest rates
soon following a better-than-expected U.S. employment figure for
April.

If the rates increase, global investors will choose to pull
out some of their investments in the Asian market and shift to
the U.S. market, which offers a better net yield and is deemed
safer.

The interest rate issue set Asian stock markets on fire on
Monday. Tokyo's Nikkei Stock Average of 225 fell 554.12 points,
or 4.84 percent, to 10,884.70, its lowest since February. In Hong
Kong, the Hang Seng Index fell 425.26 points, or 3.6 percent, to
11,485.50.

Elsewhere, the rupiah fell by 2.46 percent to Rp 8,950 from Rp
8,735 on Friday.

Currency analyst Pardi Kendy of Bank Buana said that aside
from the Fed's plan, the decline in the rupiah was attributable
to China's plan to scale down its investment spending in a bid to
consolidate its economy, which could deal a blow to the region's
exporters.

"Investors will now grab U.S. dollars because if the rates
increase, they will turn to all U.S.-based portfolios... The
other regional currencies have already declined due to the
concerns, but the rupiah is just beginning to," said Pardi.

Dealers said the recent fall in the Indonesian stock market
had also dampened rupiah sentiment.

It was earlier predicted that the rupiah would fall to around
Rp 9,000 per dollar on political concerns in the run-up to the
presidential elections in July.