Iraq to keep haunting market: Analysts

Dadan Wijaksana, The Jakarta Post, Jakarta

Despite a 1.6 percent surge last week, the Jakarta Composite Index will be under pressure this week as lingering fear over possible war in Iraq will push investors to the sidelines, a stock analyst said.

"Lingering uncertainty in the Middle East will keep this week's trading in a thin range. Consequently, the index will not move in a drastic way, either up or down," the researcher at a foreign-based securities firm said on Sunday.

Last week, the index closed at 394.63 points, up 6.188 points or 1.6 percent from the previous week's closing. Daily volume averaged 172.34 million shares worth Rp 179.7 billion (about US$20.4 million), compared to 308.08 million shares at Rp 232.9 billion the previous week.

The analyst said last week's rise was due mostly to a late surge in selected blue chips as a result of bargain hunting by investors.

"This helped lift the index. Although overall sentiment remained bleak, the shares attracted investors with their relatively low prices," he said.

He was quick to add, however, that this would unlikely be the case this week amid worsening global sentiment. "A war has become more and more likely, with the U.S. looking determined for it."

Economists have predicted a war in Iraq would create market jitters across the globe, further delaying a rebound in the world's economy. Some have even predicted war would prompt another round of global depression.

"Aside from that, as happened in the past, such a war would instigate radical movements here, which would further depress our market," the analyst said.

Following U.S.-led military attacks on Afghanistan in late 2001, anti-Western street rallies took place across the country.

A number of militant groups also conducted "sweeps" of foreigners, prompting several foreign firms to temporary halt operations in the country.

On the currency market, the rupiah is expected to remain flat this week, as speculators wait for progress in the U.S.-Iraq confrontation.

"If war breaks out, anti-U.S. rallies would crop up here, which would hurt business confidence, thus putting heavy pressure on our currency.

"So I think players will be cautious this week, resulting in flat movement of the rupiah," a stock dealer at a local brokerage said.

The rupiah closed last week at 8,870 against the U.S. dollar, not far from its 8,850 close the previous week.