Index likely to keep falling this week: Analysts
Dadan Wijaksana, The Jakarta Post, Jakarta
The Jakarta Composite Index, which has been on the decline over the past two weeks, will remain under pressure this week as investors are still shying away from the market on concerns over possible attacks on Iraq by the U.S, analysts have said.
"The increasing tension between the U.S. and Iraq has made investors all over the world, including those in Indonesia, panic, and as such will likely drag down the index," Jasso Winarto of Sigma Research Institute told The Jakarta Post.
Last week, the index closed at 427.8, down 3.5 percent from the previous week's close of 443.67.
That was the second successive week the index had dropped by more than 3 percent.
Prasti Rindrawati, a stock trader at a local brokerage, also saw little chance for the index to recover, as bearish market sentiment would prevail, mostly due to global factors.
"The index will likely keep dropping next week, as sentiment in the market is still negative," Prasti said over the weekend, adding that the possibility of war had forced market players to move to the sidelines.
The U.S. has been threatening to launch a military attack on Iraq, a move that has sent bad signals across the globe.
Analysts said while the threats alone had dealt a blow to investor confidence -- dashing earlier hopes of a global economic recovery -- the impact of an actual war would be even more damaging.
However, Jasso and Prasti played down concerns that the index would drop through the 400-point level, saying that unless the war materialized -- the index would not drop that far.
"The index will probably decline by about 10 points," Prasti said.
In last week's trading, daily volumes averaged 430.56 million shares, worth Rp 297.1 billion (about US$33.89 million), compared with the previous week's 284.22 million shares valued at Rp 237.7 billion.
In the currency market, the rupiah was expected to hover throughout the week at around the same level, as it had over the past few weeks, a currency analyst said.
The analyst said the currency's movement would be influenced by domestic rather than global factors.
"The S&P reports are good news. This could help maintain the rupiah's stability for a while," he told the Post, referring to the international rating agency Standard & Poor's.
The agency raised last week the country's foreign currency credit rating following completion of the rescheduling of commercial loans owed to private creditors grouped under the London Club.
However, that would be offset by high dollar demand from corporations, for both debt servicing and import financing, he said, citing that state oil and gas company Pertamina? was expected to buy some dollars to pay for its imports.
The rupiah ended last week relatively flat at Rp 8,865 per dollar, compared with Rp 8,840 the week before.