Interference haunts stock market: Analysts

Interference haunts stock market: Analysts

JAKARTA (JP): Concern over market interference is likely to
haunt trading this week, analysts warned, adding that selling
pressure may continue to slash the index's large gains over the
previous weeks.

Stock analyst Ahmad Subagja from Niaga Securities suggested
that investors should remain wary, since trading in a market that
was being manipulated was unpredictable.

"I advise to sell immediately on potential gains, rather than
holding on and risking a greater loss," he told The Jakarta Post
over the weekend.

He said that judging from the previous weeks' trading
patterns, it appeared as if the stock market had been
manipulated.

The index had been making gains despite negative market
sentiment, Ahmad said.

In the past few weeks, the Jakarta Stock Exchange (JSX)
Composite Index's rally has made it among the best performing
stock indices in the world, according to Bloomberg data.

The upward trend took place in contrast to the rupiah's steady
decline following violent labor protests, and continuing negative
political news.

In response, the JSX has initiated a preliminary investigation
into what it called the "unusual gains". The exchange expects the
results of the investigation by next week.

Among the unusual patterns was the fact that most of the gains
were notched up shortly before the market closed, as if to ensure
the index remained high.

Ahmad said that this kind of pattern smacked of manipulation,
although it was as yet unclear who the "market makers" were.

"Some investors actually are aware of this interference and
have joined the market maker," he went on.

He said in order to profit from the interference, investors
must position themselves in line with the market maker, something
that is not easy.

"Therefore, I suggest that profits be taken at the first
opportunity," he added.

For this week, Ahmad saw the index still having upside
potentials, providing interference continued to deter selling
pressure.

During last week's trading, however, pressure to sell took
over, as investors cashed in on the sharp gains the index had
made in the previous weeks.

It brought the index a touch higher to 437.62, up from 437.59.
at the previous week's closing.

Ahmad predicted the index to remain hovering at 430 this week,
with resistance likely to be meet at 450.

Elsewhere, stock analyst Ario Ardhikari from PT ABN Amro Asset
Management concurred with Ahmad about his suspicions of market
manipulation.

He said he saw no incentives strong enough on either the
economic or political front that could have pushed the index up.

But he noted that the market had a tendency of improving
shortly before year's end or in between semesters.

"The gains appear regularly, though not always, not in every
quarter or semester," he explained.

He said that during these periods, securities firms,
especially fund management firms, were due to report their
portfolio performances.

"They may have done some window dressing to make their
portfolios look good," he said.

Several fund management firms about to report their portfolio
performances may have agreed to prop up prices of certain stocks,
which in practice constituted market manipulation, Ario
explained.

Assuming this to be the case, he went on, interference would
no longer occur this week as the first semester had passed.

According to him, without interference to keep selling
pressure in check, the index was likely to loose ground this
week.

On the other hand, he said, the market index hac been on an
upward trend over the past two months.

He attributed this development to growing confidence that the
impeachment of President Abdurrahman Wahid would boost the index.

The President is facing impeachment by the People's
Consultative Assembly's special session next month.

"Investors want to get in while it's cheap on speculation they
will rake in gains after the special session," he said.

On the currency market, the rupiah has been unable to recover
since it tumbled over news of violent labor and fuel protests
some two weeks ago.

Since mid-June, the local unit has descended from its tight
trading band at Rp 11,200 against the U.S dollar.

It closed last week's trading at Rp 11,410 compared to Rp
11,398 at the previous week's closing.

Dealers expect the rupiah to remain sluggish as corporate
dollar demand to pay offshore debts still weighs on the local
unit. (bkm)