Index falls on security, political concerns

Index falls on security, political concerns

Dow Jones, Jakarta

The Jakarta Stock Exchange Composite Index ended sharply lower on Wednesday hurt by various negative factors from lingering local security concerns to a possible economic slowdown in China, dealers said.

Police said Wednesday they found traces of the same high explosives used in the 2002 Bali bombing outside a grocery story where a bomb blast killed two people in Pekanbaru, Riau Province, Tuesday. However, they said that "it's too early to link the two attacks."

Dealers said the explosion could raise concerns about local security ahead of the presidential polls in July.

The index ended down 21.521 points, or 2.8 percent, at 758.082.

Decliners outnumbered gainers 123 to 16, with 49 stocks unchanged.

Volume was 2 billion shares valued at Rp 1.07 trillion (about US$123 million).

Dealers also attributed the sell-off to news that former dictator Soeharto's party Golongan Karya has won the parliamentary elections, garnering 21.6 percent of the vote, with the incumbent PDI-P party in second place with 18.5 percent.

The failure of any party to win a large share of parliamentary seats in the election discouraged investors. A split Parliament could result in weak leadership and, in turn, hurt the outlook for Indonesia's financial markets in the longer term, analysts said.

These negative factors spurred mid-term investors to continue taking profits, dealers said. The main index has risen 13 percent since the start of the year.

The index is expected to fall further and break below the support level of 750 if selling continues Thursday, a trader with a foreign brokerage said.

Bank Mandiri, the nation's largest lender, led decliners, down Rp 75, or 5.2 percent, to Rp 1,375 on renewed expectations it would issue rights shares to strengthen its capital.

Cigarette maker Gudang Garam lost Rp 750, or 5.3 percent, to Rp 13,350 on profit-taking and after the company said Friday its first quarter net profit rose only 8.5 percent on year, below market expectations.

Bellwether Telekomunikasi Indonesia dropped Rp 200, or 2.5 percent, to Rp 7,900 and car maker Astra International lost Rp 350, or 5.8 percent, to Rp 5,650.

Meanwhile, the rupiah ended slightly higher on suspected intervention by Bank Indonesia and the dollar's slide against other Asian currencies, dealers said.

But growing concern over domestic security ahead of the presidential election in July limited the rupiah's appreciation and is expected to continue weighing on the local currency in the short term, dealers said.

The dollar ended at Rp 8,700, down from its close of Rp 8,720 Tuesday.

Dealers said they suspect that Bank Indonesia sold the dollar at Rp 8,710 to quicken the rupiah's recovery, taking advantage of the dollar's consolidation against other Asian currencies.

The dollar, however, rebounded from its intraday low of Rp 8,695 as the market was concerned about the bombing in Pekanbaru.

Dealers said the dollar could slip below Rp 8,700 Thursday if it loses further ground against the yen. They expect the dollar to trade between Rp 8,690 and Rp 8,720 Thursday.