JSX stock prices may drop on fear of U.S. rate hike
JAKARTA (JP): Fears of a possible U.S. interest rate hike and a slow recovery of investors' confidence in Indonesia's political stability are likely to push share prices here further down this week, analysts said.
Stock prices on the Jakarta Stock Exchange (JSX), which have been continuously stagnant following the July 27 riot, need more time to rebound as foreign investors are likely to remain sidelined.
A senior manager with a local securities company told The Jakarta Post over the weekend that expectation of a U.S. interest rate hike has returned to the market following the upward revision in growth rate of the second-quarter U.S. Gross Domestic Product last week.
The U.S. Commerce Department released data last week that the country's economy expanded at a 4.8 percent annual rate in the second quarter, rather than the 4.2 percent previously estimated.
Second-quarter growth figures, new home sales, consumer spending and factory orders all point to a surging economy, prompting fears among investors that the Federal Reserve, the U.S. central bank, will intervene to hike interest rates in order to curb inflation.
"So it seems to me that investors will be very cautious and that stock prices may further go down this week," the executive said.
Meanwhile, a senior dealer with a London-based brokerage noted that on the domestic side, investors are still alert on political issues, although the situation is now more controllable.
The dealer, who requested anonymity, told the Post that the issue was not what was going on in the political scene right now but the very slow recovery of investors' confidence in the nation's political stability after the July 27 riots.
"Investors base their portfolio allocations on various factors. Most of them had never been worried about political stability in Indonesia until the July 27 incident," the dealer said.
"Once they changed their valuation grade on political risk, they would not easily upgrade the revision," he added.
He argued that Indonesia's macroeconomy is too strong to blame for the continuing bearish mood on the stock market. There is also nothing in the microeconomy to explain the sluggish market, because a number of big companies have reported stronger results of their operations in the first half of this year.
"As far as the domestic issue is concerned, investors should have been more cautious on political risk," he said.
The dealer didn't deny that the country's political situation is currently much better. He contended, however, that it was not enough to immediately boost a major recovery of investors' confidence.
He said that in line with the slowing recovery process, the market would not see big deals from foreign investors like those before the incident.
"I would say that the market may further go down or be stagnant in quiet trading next week," he added.
An executive of a Japanese-based securities company viewed that in addition to interest rates and political issues, investors may also reduce their activities to anticipate the forthcoming initial public offering of the state-owned Bank Negara Indonesia 1946.
Stagnant
Stock prices on the JSX declined by 0.2 percent last week on lack of foreign participation, coupled with regional weakness.
The benchmark JSX Composite Index edged down 1.6 points to 547.61 points. Total trading value reached Rp 1.1 trillion (US$446 million) with 550 million shares changing hands.
Foreign buy transactions amounted to Rp 615 billion against sell transactions of Rp 525 billion.
Among the most active stocks last week were Lippo Life and Lippo Securities, which were buoyed by internal restructuring in the Lippo Group.
Lippo Life booked transactions of 15.5 million shares worth Rp 31 billion, while Lippo Securities recorded total transactions of 45 million valued at Rp 67 billion.
Lippo Life and Lippo Securities' share prices respectively declined by Rp 272 to Rp 2,000 and by Rp 150 to Rp 1,425.
Meanwhile, Lippo Bank increased by Rp 50 to close at Rp 3,600.
The largest stock, Telkom, which announced higher first-half results, closed down by Rp 50 to Rp 3,300. Indosat also decreased by Rp 50 to Rp 7,400.
Cigarette manufacturer HM Sampoerna shed Rp 625 to Rp 22,500, while its competitor Gudang Garam increased by Rp 475 to Rp 8,600.
The 10 most active stocks in value, other than Lippo Securities and Lippo Life, were Putra Surya Perkasa (with a trading value of Rp 91 billion), Berlian Laju Tanker (Rp 80 billion), Karwell Indonesia (Rp 49 billion), Bimantara Citra (Rp 48 billion), Gudang Garam (Rp 46 billion), Duta Anggada (Rp 45 billion), Polysindo (Rp 36 billion) and Surya Dumai (Rp 35 billion). (alo)