JSX looks uncertain over rupiah instability
JAKARTA (JP): The share trading on the Jakarta Stock Exchange (JSX) will likely head for another bearish sentiment this week as the buying mood of investors has been badly hurt by the untamed fluctuations of the rupiah, according to equity analysts.
The analysts said that the apparent shaky relations among policy makers and mounting security concerns were creating uncertainty about what was going to happen next week.
An analyst at a local securities firm said the riot which broke out over the weekend in the Glodok area, North Jakarta, would certainly add to the already bearish sentiments in the local stock exchange.
"The Glodok riot will provide more incentives for not trading next week," he said.
The government's move in cleaning up the street merchants who were selling illegal, pirated Video Compact Discs (VCD's) in the Glodok area on Saturday morning turned into a clash with the police.
The clash induced acts of arson and looting by an unknown mob who suddenly rushed to the area.
However, police officers, helped by the local residents, finally managed to calm the situation by midday.
At least a car dealer and a fast food outlet were looted, while a few other stores were partly burnt.
Another analyst said worries over a possible U.S. interest rate hike by May 16 was also expected to weigh on the JSX this week.
"There will be a mixture of negative sentiments next week -- bad management by the government, the possible hike of interest rates and security concerns," he said over the weekend.
"A major downturn in the local stock market is not impossible with this kind of situation," he added.
The government of Indonesia, which is currently led by President Abdurrahman Wahid, has been badly criticized by analysts for being too much occupied with political maneuvers while giving little attention to the nation's economic recovery.
Senior currency dealer, Pardi Kendy, urged the government to keep its word of going "all out" in efforts to curb the rupiah if the local currency continued weakening this week.
"It is important that the market perceive that the government is not bluffing, and is not weak as well," he said.
The market sentiment for the rupiah had been so negative now that it was already in the emergency state, Pardi added.
"Market intervention on the right timing to help support the rupiah value against the dollar is a must," he said.
He was confident that the hike in the U.S. interest rate, slated for early this week, would definitely hurt the rupiah if the local currency interest rates were not raised as well.
"The government needs to raise rupiah interest rates at least on a temporary basis until the negative sentiments of the rupiah subside," he said.
"Don't let the gap between the rupiah and dollar interest rates get wider in times where overall conditions in Indonesia are not in a stable state," Pardi added.
The U.S. Federal Reserve, as widely speculated, is going to raise its interest rates aggressively, by more than 25 basis- points, in its next meeting on May 16 to slow down the country's fast growing economy.
How well the rupiah will fare this week is dependent on the government's actions, according to Pardi.
The rupiah dove to its seven-and-a-half-month low last week to Rp 8,380 against the U.S. dollar, compared to Rp 7,985 the previous week. The currency managed to breach the Rp 8,500 level on Friday in panic selling before closing at Rp 8,380.
The JSX Composite Index decreased 3.4 percent last week to close at 526.87 points, compared to 545.61 the previous week. Daily average transaction value increased to Rp 540.53 billion last week, compared to Rp 371.56 billion the previous week.
The daily average turnover also increased to 417.60 million shares from 294.4 million shares the previous week.
Last week's top gainers were PT Argha Karya Prima Industry, whose shares were up by 35.29 percent, PT Inti Indorayon Utama, 31.25 percent, and PT Asiaplast Industries, 27.27 percent.
Cash dividend announcements were made by PT United Tractors, PT Alumindo Light Metal Industry, PT Eka Dharma Tape Industries, PT Selamat Sempurna, PT Komatsu Indonesia and PT Indal Aluminium Industry.
The week's big losers were PT Jakarta Setiabudi Property, which was down by 28.57 percent, PT Inter-Pacific Bank and PT Pudjiadi Prestige Limited, both fell by 25 percent.
Top brokerage firms by transaction value were PT Ciptadana Sekuritas with Rp 844.11 billion in transaction, PT Vickers Ballas Tamara with Rp 398.50, PT Merrill Lynch Indonesia with Rp 216.74 in business. (udi)