'Floods could tip stock market down'

'Floods could tip stock market down'

Berni K. Moestafa, The Jakarta Post, Jakarta

Selling pressure might drag the local stock market down in
lackluster trading this week. And many traders might skip work as
heavy flooding continues to paralyze the capital, analysts said
over the weekend.

Investment analysts at Mandiri Sekuritas, Zulfiqar said that
even without the flooding, the market's more than one-month rally
was nearing its end.

"The index is already overboard," he said, explaining the
stock market had gained too much over the past few weeks, and
that a downward correction was inevitable.

Since January the local stock market index has gained 18
percent, making it one of the world's best performing markets.

Foreign investors raiding undervalued stocks in Indonesia,
Thailand and the Philippines have spurred sharp gains in these
markets in what is known as the January effect.

The Jakarta Stock Exchange (JSX) Composite index rose to
454.28 on Friday from 452.46 a week before.

Zulfiqar expected selling pressure from local investors would
outgrow the weakening inflow of foreign capital this week.

He added that the likelihood of quite trading this week would
only make it easier to break the market's upwards trend.

"I think that many (market participants) would prefer to stay
home rather than go out and face the floods," he said.

Heavy rains have inundated large areas of Jakarta since last
week, forcing many commuters to stay home.

It may get worse though. Flood victims in the Manggarai area
are demanding authorities open a floodgate, which, at their
expense, has been protecting Jakarta's business districts in Jl.
Sudirman and Jl. Thamrin.

But as yet, news of the floods had made no significant impact
on the trading of particular shares, said Fajar Hidayat, an
analyst with PT Trimegah Securities.

"Such news should have affected shares of consumer products,
but I don't see any big declines so far," he said.

He said heavy flooding might have disrupted the distribution
channels of retail companies or the output of consumer products.

Fajar also concurred with Zulfiqar on rising selling pressure
capping the index rise. He predicted the index would fall, but
not below 435. Zulfiqar said the index could fall to as low as
430.

A currency dealer said the rupiah also faced quiet trading
this week, as the floods was keeping participants off the market.

But unlike the JSX index, he said the rupiah would likely
remain resilient against the U.S. dollar.

"Speculators and short term (dollar) buyers might not want to
buy the dollar now," the dealer at a foreign bank said.

He attributed the slack interest on the sudden rise of the
overnight rates in the interbank market.

"I haven't seen rates as high as this in the last three
years," the dealer said, adding rates stood at some 50 percent.

He could not specify the reason for the surge, but estimated
that it might be linked to the flooding, which had spurred demand
for liquidity.

He said with rates that high, the cost of buying rupiah in
order to purchase the U.S. dollar became needlessly expensive.

This, he said, thwarted speculators from pressurizing the
rupiah, while keeping corporate dollar buyers on hold.

According to him, the rupiah is likely to maintain its trading
range of between 10,300 to 10,400 this week. It closed last
Friday at 10,325 from 10.455 a week earlier.