Gloomy outlook for rupiah, stocks, experts say
Gloomy outlook for rupiah, stocks, experts say
Dadan Wijaksana, Jakarta
The stock index and rupiah are expected to remain under pressure
in the coming weeks, clouded by negative sentiment stemming from
the prospects of global interest rate increases.
An analyst said on Sunday that with the signs of a U.S.
benchmark rate hike already apparent, stock markets worldwide
would be the first to bear the brunt, even more so in the case of
a nation like Indonesia with lingering domestic economic problems
and political uncertainty in the run-up to the July 5
presidential election.
"The upward movement in global capital markets will become
stalled and we are likely to see a downward trend. Indonesia will
likely be hit even harder because of election concerns," Dandossi
Matram told The Jakarta Post.
Indonesia will hold its presidential election on July 5, with
a possible run-off between the top two candidates on Sept. 20.
Dandossi said the imminent rise in U.S. interest rates would
make it less attractive to invest in the stock market as compared
to other investment instruments, including bonds.
"It's time to quit (the stock market) as it is no longer
attractive."
The Jakarta Composite Index closed last week at 692.72 points,
around 1.6 percent lower than the previous week's closing, on the
back of continued subdued market sentiment and worries over the
weakening of the local currency against the dollar.
Last week's average daily trading volume was 788.68 million
shares worth Rp 501.2 billion (US$53.3 million) compared to 1.02
billion shares worth Rp 605.1 billion the previous week.
Top executives at the U.S. Federal Reserve are scheduled to
convene by the end of the month to discuss interest rates, with
analysts widely predicting a hike of between 25 to 50 basis
points.
A stock dealer at a Jakarta-based bank also attributed the
negative sentiment to the absence of positive leads in the
market.
"With no good news in sight, the market will remain nervous
and under pressure," she told the Post.
The two agreed that what may drive the market was short-term
speculative trading.
"Practically, it's the bargain-hunting speculators that will
drive the market, as has been the case in recent days," Dandossi
said.
Meanwhile, the rupiah is likely also to weaken against the
U.S. dollar but within a limited range following the introduction
of measures by the central bank to stop the local unit's slide.
Last week, the rupiah ended slightly weaker at 9,405 per
dollar as compared to 9,380 a week earlier.
Having lost 4.5 percent of its value during May, the local
unit has so far depreciated by some 11 percent this year --
higher than the around 7 percent gains it booked throughout 2003.
The central bank has raised the bank reserve requirement in a
bid to absorb excess liquidity and stabilize the local currency.
Bank Indonesia has said that the excess liquidity in the banking
sector had been used to speculate against the local unit.