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)