JSX composite index drops to 592 over political concerns

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) plunged on Monday after the General Elections Commission (KPU) failed to approve the general election results.

The Jakarta Composite Index fell 5.3 percent or 33.11 points in active trading to close at 592.72 from Friday's close of 625.83.

Securities analysts said many large investors sold their stocks in fear that the KPU members failure to ratify the election results could cause a delay in the presidential election scheduled for November.

Allan Monangin, an analyst at Peregrine Sewu Securities local securities company, said the fall in the index was mainly political.

"We are facing uncertainty in the unratified elections results," he said.

KPU failed to get the majority of its 53 members to ratify the result of the June 7 landmark elections.

He said a lot of the panic selling was from local investors who were surprised the predicted bad news about the uncertainty of the election results really happened on Monday.

"A lot of local investors were selling in panic today (Monday)," he said.

Foreign investors were more anticipative toward the uncertain result from KPU since the beginning of this month at least, he said.

"Foreign investors have been the net sellers since the beginning of July," he said, adding, however, that there were a few foreign investors who were net buyers on Monday.

The JSX Composite Index broke its important 700 barrier in mid-June, the first time since the crisis hit the country in late 1997, on an influx of foreign funds. But local share prices weakened in the last two weeks from the uncertainty of the presidential election.

Allan said the positive sentiment in JSX would return by early August when companies release their first semester financial statements.

"Many of these companies will show they have improved performance as they booked a foreign exchange gain from rupiah appreciation from the end of last year," he said.

But he said positive sentiment would not last long as the general meeting of the People's Consultative Assembly (MPR) approaches.

The Assembly, comprising elected members of the House of Representatives (DPR) and community appointees, is scheduled to elect a new president and vice president in November.

Allan predicted the index would have a support level of 580 points until the meeting.

"The 580 level is very strong as a lot of blue-chip shares have gone down badly," he added.

Adrian Rusmana, an analyst from BNI Securities, agreed that politics played an important role in driving the JSX index down on Friday, but added other factors also made significant influences.

"The JSX index has gone up substantially after the June elections, but without any fundamental improvement supporting it so far," he said, citing that Monday's fall was the correction of its level.

He mentioned the strengthening of the U.S. dollar was also a decisive factor.

He also said he noticed a number of investors switching from investing in the equity markets to buying U.S. dollars.

Asian stocks

Asian stocks lost ground on Monday with individual markets hit by troubles ranging from a strong yen and the threat of a U.S. rate hike to the debt-laden Daewoo conglomerate and Taiwan-China tensions, according to Reuters.

Tokyo's benchmark Nikkei 225 average closed 0.3 percent lower at 17,491.34, while Hong Kong's Hang Seng index shed 1.7 percent.

The Hang Seng ended below the key 13,000 support level at 12,866.52 on fears of a U.S. rate hike and worries banks would report mounting debts in coming weeks.

The Dow Jones average closed down 0.5 percent at 10,910.96 on Friday.

In Seoul, the Korea Composite index slumped 3.5 percent to 872.94 as fears about Daewoo Group battered market sentiment despite government measures mapped out over the weekend to help the chaebol restructure.

Tensions between Taiwan and China continued to weigh on share prices in Taipei, helping to push the key stock index down 1.7 percent to 7,595.71 by the close.

Singapore's Straits Times Index closed down 2.5 percent due to fears of a U.S. rate hike.

New Zealand's NZSE-40 Capital Index lost 0.3 percent to 2,180.49 on doubts about industrial group Fletcher Challenge's reorganization.

Thailand's Composite SET index ended down 3.8 percent at 457.68 on worries some banks may need to raise more capital.

Weak corporate earnings forecasts pushed Philippine shares down 2.9 percent to a one and a half month low of 2,376.12.

Kuala Lumpur's Composite index ended down 4.0 percent after falling through the 800 point support level. (udi)