Fear for possible riots still clouds stock trading

JAKARTA (JP): Widespread rumors of massive riots ahead and after yesterday's Independence Day celebration would continue to cast a shadow on the local stock exchange this week.

Securities dealers said investors, many of whom were still traumatized by the devastating May riots, would most likely sideline the market until the rumors were proven untrue.

"Although there have been no reports about riots ahead of the weekend, most investors still don't feel comfortable with the country's social and political situation," head of research of Trimegah Securindo Lestari David Chang said.

The Jakarta Stock Exchange (JSX) Composite Index gained ground in extremely active trading Friday after weeks of falls.

Securities analysts attributed the rare increase in the price gauge on the bullish sentiment in regional markets and the "better than expected" security situation in the capital.

But they warned that Friday's active trading could not be taken as an indicator for this week's activities.

"Though trading transactions rose by almost 500 percent on Friday, it does not mean that investor confidence in the local market has recovered," a broker with Mashill Jaya Securities said.

Most securities analysts and brokers shared the common view that positive developments on the social and political fronts would certainly determine investor sentiment in the battered local bourse in the weeks ahead.

"If there is no social and political riots early this week, people will feel comfortable enough to enter the market again," Chang said.

"And this should improve stock prices on the local exchange as many stocks have been oversold over the past few weeks," he added.

Security officers were visible in most business and public centers in Jakarta and other major cities across the country to ensure security.

The associate director of state-owned securities house Bahana Securities, Andre Cita, also said the positive sentiment in the regional market would likely continue this week and such a good atmosphere would also be felt on the local bourse.

But he said the fear of the possible unrest would remain a major factor in this week's trading climate.

Trimegah's Chang said if there were no reports of riots on Monday and Tuesday, the market would continue the weekend's bullish sentiment.

But he warned that such an improved condition would be short- lived because the fundamental factors of listed companies remained very weak.

"Investors will be disappointed to see the poor financial results of most companies in the first semester of this year as an impact of the crisis," he said.

Financial setbacks due to the 80 percent depreciation of the rupiah against the American dollar, bringing the rupiah to the 13,000 level compared to 2,500 before the crisis in July last year, have caused dollar denominated debts of most listed local companies to increase significantly when converted to rupiah.

"These poor financial results will certainly kill the buying impetus," Chang added.

Most stock analysts and brokers said the rupiah's direction would remain the most important factor in stock trading activities.

"If there is an improvement in the rupiah, stocks will follow suit," one of them said.

The rupiah closed slightly higher against the U.S. dollar on Friday at 12,700 compared to 12,800 at close the previous week.

The country's financial market was closed yesterday to celebrate the 53rd anniversary of independence.

The Jakarta Stock Exchange (JSX) Composite Price index closed 2.1 percent lower to 414.63 last week from 423.61 the previous week.

Daily average turnover rose significantly to 277.88 million shares changing hands on the regular market last week from 170.76 million the previous week.

Daily average transaction value rose sharply higher to Rp 440.41 billion last week from Rp 210.30 billion the previous week. (aly)