'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.