Currency uncertainties will shade JSX's trading

Currency uncertainties will shade JSX's trading

JAKARTA (JP): Uncertainties over the direction of the rupiah
and other regional currencies will continue to shade trading
activities on the local stock market this week, analysts and
dealers said.

Securities analysts said that investors did not see any
attractive incentives for them to enter the market given the
current volatility of the rupiah, after the Thai baht and the
Philippine peso were under attack in the last few weeks.

The rupiah has been under severe attack for the past few weeks
following the devaluation of the Thai baht and the Philippine
peso early last month. Its value has declined by 20 percent this
year, much of which took place in the past two weeks.

On Thursday alone, the rupiah lost 5 percent against the
American greenback following the central bank's move to abandon
the currency's intervention band. On Friday, the currency
suffered another 3 percent drop to close at Rp 2,880.

Analysts said that they are still confused about the direction
of the currency in short-term but believed that it would
stabilize in the next few weeks.

"Faced with such volatility, nobody dares to enter the
market," one analyst said.

Tom Inglis, head of research at ING Barings Securities, said
that uncertainties in the market would remain and rule over the
fundamentals.

"I do not see any immediate rebound in the market and it might
recover in the next three to four months," he said.

"It's just a blue week for most investors ... and nobody can
do anything," he said.

American experts also have the same view, saying that the
free-floating rupiah should rebound on the strength of economic
fundamentals in coming weeks, but volatility will still deter
foreign investors until then.

"We may enter when we feel the likelihood of a stable exchange
rate will increase," said Luis Luis, emerging market debt analyst
at Scudder Stevens & Clark. "That will depend on getting more
stability in Malaysia and Thailand."

Longer-term rupiah stabilization will most likely arrive via
equity investment, a more liquid market in the country, Luis
said. "As equity investors return to pick up bargains, we'll see
the currency improve," he said.

Invesco Asset Management is much more skeptical.

It is bullish on Latin America and Eastern Europe but will
tread lightly in Indonesia and other Southeast Asian countries
amid regional currency uncertainty.

"Our strategy has been to overweight Latin America and Eastern
Europe. We have increased our aggressive stance as the months
progressed," Francesco Bertoni, head of the fund manager's
emerging markets desk, told Reuters.

Pentasena Arthasentosa's Edwin Syahruzad said that
macroeconomic fundamentals were no longer the case.

"It has turned into a microeconomic problem. How strong are
the fundamentals of the company during the current volatile
market?" he asked.

Christina Lim, of Harita Securities, said that most investors
had to track sideways during this sluggish market and watch the
direction of the currency in the coming weeks.

"We advise our clients to sell and watch closely on certain
cheap big capitalized stocks in the coming weeks," she contended.

"Investors are rushing to stay away as soon as possible and
sell at whatever price due to rupiah currency fall," she said.

The JSX Composite index fell by 8.54 percent, or 57.73 points,
to close at 617.70 last week from 675.43 in the previous week.

Average daily turnover rose 22 percent to 299 million shares
last week compared to 249 million shares in the previous week.

However, the average daily value declined 9 percent to Rp 474
billion (US$175.55 million) last week, compared to Rp 520.2
billion in the previous week.

Most blue chip stocks declined last week, with Bank Negara
Indonesia falling by Rp 200 to Rp 1,200; HM Sampoerna by Rp 575
to Rp 7,675; PT Telkom by 225 to Rp 3,450; and the satellite
company Indosat by Rp 75 to Rp 7,075 while Gudang Garam rose by
Rp 675 to Rp 9,300. (aly)