Interest rate fears cast shadow on JSX

JAKARTA (JP): Fears of a possible increase in American interest rates is likely to continue to cast a shadow on domestic stock trading activities.

Securities analysts said that share prices would remain under pressure this week as most investors would stay on the sidelines, waiting for the result of the U.S. Federal Reserve meeting.

The U.S. Fed is scheduled to hold its Federal Open Market Committee meeting on May 25.

The analysts said over the weekend that factors which would cause pressure on the local stock exchange would remain the same as last week -- interest rate fears and estimated declines in banks' earnings.

"Possible interest rate increases and poor performances of banking stocks will remain the big issues this week," Edwin Syuhrizal, from Amsteel Securities Indonesia, said.

Like other markets, the Indonesian stock exchanges, he stressed, would be affected by any U.S. interest rate hike.

In addition to the interest rate fears, many investors will also wait for the announcement concerning listed companies' financial reports, said one analyst at DBS Securities Indonesia.

The JSX composite index dropped 10.73 points to 656.11 from the previous week's close of 666.84.

Daily turnover averaged 183.4 million shares, down from the previous week's 194.9 million shares.

Daily transaction values averaged Rp 413.10 billion (US$173.6 million) against Rp 441.96 billion ($185.7 million) the previous week.

The stock index lost ground on heavy selling of blue chips including Bank Negara Indonesia, PT Telkom, HM Sampoerna and Gudang Garam.

The finance ministry's ruling on cigarette retail prices issued late last week killed the buying mood on cigarette producers' shares such as H.M. Sampoerna and Gudang Garam.

The ruling, which asked the cigarette producers to give retailers a 10 percent margin, confused investors, one dealer said.

"Investors thought that the cigarette firms were required to set aside 10 percent of their profits but they were wrong," he said.

The regulation precipitated heavy selling pressure on cigarette producers' stocks, he added.

HM Sampoerna dropped by Rp 300 to close at Rp 11,050 but Gudang Garam rose by Rp 25 to Rp 10,075

The central bank's low lending target also had a negative impact on banking sector stocks.

"The low lending growth will curb the banks earnings," another analyst said.

BNI dropped by Rp 25 to close at Rp 1,375, Lippo Bank by Rp 100 to Rp 2,450 and Bank Bira by Rp 175 to close at Rp 3,325.

Telkom's shares pushed the market heavily down on the news a private company controlled by Bambang Trihatmodjo was planning to operate in domestic market, previously the preserve of Telkom.

"Telkom's drop pushed the market down heavily," Edwin said.

Telkom dropped by Rp 275 to close at Rp 3,625.

Other losers last were Bank Pikko which dropped by Rp 75 to Rp 1,025 and Bank PDFCI which fell by Rp 325 to RP 2,250.

Last week's gainers, mostly second and third-line stocks, included Sekar Laut which rose by Rp 450 to Rp 1,225, Sekar Bumi, up Rp 575 to Rp 2,375 and Soedarpo Corporation, up Rp 225 to Rp 1,975. (09)