Jakarta stocks end lower on profit taking, oil price

The Jakarta Post, Jakarta

Profit taking and concern over the rising price of oil have pulled down Jakarta stocks for the second consecutive day, wiping out gains from the euphoria of a peaceful presidential election earlier this week.

The Jakarta Composite Index ended 0.18 percent or 1.468 points lower on Thursday at 816.762 on volume of 2.28 billion shares worth Rp 1.17 trillion. Thanks to bargain hunting in second-liner shares, the Index was off its intraday low of 811.751.

Stock analyst Arwani Pranadjaja of Mandiri Securities said the decline was primarily caused by profit taking in several bluechips, which had already been overbought by investors buoyed by the trouble-free election.

"The Index has soared too fast, and it is normal for investors to go out for profit taking," said Arwani, but added that there was still the possibility the index would increase to 830 next week due to positive fundamentals.

In five trading days from Sept. 14 until Sept. 21, the Index jumped by 1.7 percent or 14 basis points.

President director of the Jakarta Stock Exchange (JSX) Erry Firmansyah has recently warned that the sharp increase in the Index was not good because once it declined, the drop would certainly be steep.

Meanwhile, stock analyst Hendra Bujang of Mega Akses Securities attributed the Index decline primarily to concern over the soaring price of oil, which might trigger higher inflation and production costs for the corporate sector.

"There is concern that the higher oil price will trim profits of companies, and this is not good for investors," said Hendra.

The price of crude oil jumped back to US$48 a barrel on Thursday.

Both Arwani and Hendra dismissed speculation that the latest market decline was triggered by concerns over the effectiveness of Susilo Bambang Yudhoyono, who is expected to win the presidential election, in carrying out his executive role.

Susilo is likely to face stiff opposition from members of the House of Representatives when trying to issue policies or make laws, given the fact that a majority of the legislators are included in the "national coalition", formed to support President Megawati Soekarnoputri in the recent election.

Hendra said the market was not concerned with this problem, since the coalition itself was currently facing internal conflict, giving room for its members to ignore instructions already issued by their parties.

"I don't think such a problem will dent investor confidence. We are more concerned with the forming of the new Cabinet. The economic ministers should be those already accepted by the market," said Hendra.

Elsewhere, the rupiah closed higher against the U.S. dollar due mostly on intervention by the central bank after companies heavily bought the unit to pay maturing overseas debts and speculation by several banks.

The rupiah ended higher at Rp 9,140 from Rp 9,165 on Wednesday.

"The rupiah has surged from its intraday low of about Rp 9,250, due to demand from the corporate sector and speculation. The unit managed to get stronger thanks to the central bank intervention," said Arwani.