JSX share prices close 4.1% lower on panic selling

JSX share prices close 4.1% lower on panic selling

By Aloysius Bhui

JAKARTA (JP): The Jakarta Stock Exchange (JSX) was
substantially corrected yesterday as both foreign and local
investors panicked after the unexpected sharp decline on Wall
Street on Friday, dealers said.

"We have never experienced such a drop on one trading day,"
Dandossi Matram from the Jakarta Brokers Club said.

JSX share prices closed 4.1 percent (23.5 points) lower at
544.53 yesterday, while turnover reached 66.4 million shares
worth Rp 228.9 billion (US$98.3 million).

Losers outnumbered gainers 104 to 13, while 23 counters were
unchanged.

The president of BZW Niaga Securities, Steven J.H. Kenny,
cited two main reasons for the sharp plunge on the JSX yesterday.

Steven told The Jakarta Post that the JSX was driven by
aggressive selling by foreign investors who thought that most
stocks were already overvalued.

"Moreover, the JSX was just in tune with the weakness of the
other regional markets today as a response to a 0.3-point
increase in the American bond rate," he said.

He said that the yield growth of U.S long-term bonds has
affected most of the leading stock markets because there is
unlikely to be another imminent cut in U.S. interest rates.

"Therefore, in the view of most fund managers, investing in
emerging markets has become less attractive now," he said.

For Indonesia, however, there were other reasons which further
emphasized the market's weakness.

The widening current account deficit, the new automotive
regulation and the high interest rate, according to Kenny, have
forced investors to re-rate their investments here.

"In addition to those reasons, investors have been
disappointed with the financial results of some big capital
stocks like HM Sampurna," Steven noted. "And they are now losing
confidence on the quality of some Indonesian companies," he
asserted.

Steven added that when investors become less confident on big
capital stocks, the whole market is affected.

He said that in such circumstances there should be some buying
opportunities.

"But I think they have yet to come. Therefore, I cannot see an
immediate rebound on the JSX to its level of a week ago," he
added.

A senior analyst from PT Sanyo Primarindo, Roberto Toruan,
told the Post that the market has become weaker and weaker since
the government issued a controversial ruling on the car industry.

"It's worth noting that most foreign fund managers hold the
shares of the listed car maker PT Astra International as well as
PT Telkom," Toruan said.

"So, if they think that such a company as strong as Astra
could easily be hit by one powerful regulation, how about the
other companies which are smaller than Astra" he said.

"Panic selling of Telkom shares, following a $3 drop on Wall
Street, was among the main reasons for today's market
correction," he said.

"However, the Wall Street factor was just a temporary reason.
What is worse for the market is the declining confidence of
foreign investors since the issuance of the automotive
deregulation," Toruan added.

He said that it will take a long time for the government to
regain foreign investors' confidence.

Telkom shares fell Rp 250 or 6 percent to close at 3,325
yesterday.

PT Indosat dropped Rp 450 or 5.3 percent to Rp 7,959.

Cigarette manufacturers PT H.M. Sampoerna lost Rp 1,350 to Rp
21,800, while its rival PT Gudang Garam fell Rp 1,500 to Rp
25,300.

Astra's local price fell Rp 75 to Rp 2,625 with more than five
million shares changing hands while its foreign price rose Rp 200
to Rp 3,300.

The chief dealer of PT Peregrine Sewu told the Post that the
rebound on Astra foreign prices was caused by the recommendation
by many analysts that Rp 3,300 would be the bottom price of the
stock.

Analysts are uncertain of what's going to happen today. Some
said that the JSX performance would depend on how Wall Street
closed last night.

"I hope what was happening today was only over-reactive
behavior. However, a possible rebound on Wall Street tonight
might not help the JSX recovery much," Dandossi said.

Editorial -- Page 4

Asian stocks -- Page 9