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.