Combination of factors behind JSX's decline

Dadan Wijaksana, The Jakarta Post, Jakarta

The Jakarta Stock Exchange's market capitalization -- the total value of stocks traded in the bourse -- dropped this year as transaction value declined due to a combination of the prolonged sluggish domestic market and the global economic downturn.

The Capital Market Supervisory Agency (Bapepam) said in its year-end report on Thursday that the exchange's market capitalization had dropped by 9.8 percent to Rp 231.75 trillion (US$22.8 billion) as of Dec. 26 from 256.62 trillion at the end of last year.

Average transaction value as of Dec. 26 declined by 22.46 percent this year to Rp 397 billion from Rp 513 billion in 2000

It also said that the July Jakarta Composite Index of 470.22 points was the highest ever throughout the year following the election of Megawati Soekarnoputri who became the country's fifth president.

However, the index was brought back to its lowest level of 367.67 points on Oct. 7 after the Sept. 11 attacks on the U.S.

On Thursday, the composite index closed at 379.97 points, or some ten percent lower than the closing index the year before, which stood at 416.32 points.

The shaky performance of the world's economic superpowers -- Japan and the United States -- early in the year signaled a global economic slowdown this year.

The devastating Sept. 11 suicide attacks on the U.S. have aggravated the slowdown so that the world's economy is now heading toward a full-blown recession.

All these, according to agency chief Herwidayatmo, coupled with the country's economic doldrums, have been weighing heavily on the performance of the exchange.

Foreign investors have been quitting the exchange, Herwidayatmo said, citing that foreign investors made up only 10 percent of transactions in the capital market, as against 20 percent the year before.

The drop in the participation of foreign investors is regarded as the main reason behind the sharp decline in several market indicators given the fact they have much larger capital than local players, who are mostly small-time investors.

"Our main program for next year is how to make the market more exciting for domestic players with large capital. Once they come in, foreign players are expected to follow suit," he said.