Local market set to follow regional bearish trend
Local market set to follow regional bearish trend
JAKARTA (JP): Prices on the local stock market are expected to
sink further this week in line with the trend in the region's
markets, analysts and brokers said.
They said that forecasts of global recession as result of
problems in the Russian economy would continue to hammer Asian
financial markets.
"As a result, our small stock market is likely to fall even
further," head of research at Vickers Ballas Tamara, Noraya
Soewarno, said.
Stock analysts said that fears of a global recession would
overshadow any positive news at home like the International
Monetary Fund's (IMF) plans to immediately release another
installment of the country's bail-out package.
"Positive news about the IMF loan will be overshadowed by bad
news about the global economy," another analyst said.
The analysts said the decline in regional markets would
further damage investor confidence in the country's weakened
economy.
"The general outlook for the country's economy remains poor
and no signs of recovery will be seen in the short term," one
analyst said.
Johanes Salim from Mashill Jaya Securities agreed and said
that prices on the local stock market would continue to fall in
coming weeks in reaction to reports of further looting and
unrest.
"The main price gauge is likely to hit the 300 points level in
the days ahead," he said pointing out that unrest like that just
seen in Cilacap, Central Java, where thousands of fishermen ran
amok in protest at low wages, would occur again.
Stock prices fell by 4.5 percent to 339.02 last Friday,
touching lows not seen since 1993 in reaction to bearish
sentiment on the regional and global markets.
Noraya said that foreign investors would not return to the
local market until stability had been restored in the country.
"If economic and political stability is not restored, our
market will continue to decline," she said.
But associate director of state-owned Bahana Securities Andre
Cita said that some resource-based companies with dollar
valuations and strong fundamentals should remain the target of
foreign investors.
"Despite the gloom, stocks in Aneka Tambang and Tambang Timah
should be a good buy," he said.
Noraya disagreed, saying that most investors were no longer
basing their portfolio investments on company fundamentals but
were following market sentiment.
"Since there is a steady stream of negative news reaching the
market ... most investors continue to shun investing in the
country," she added.
Stock brokers also said that the strengthening rupiah, which
is expected to make further headway in the coming days, would
further weigh down stocks in dual-listed firms like Telkom,
Indosat and Tambang Timah as a result of arbitrage selling.
"Investors will continue to shed stocks through arbitrage
selling due to the strengthening rupiah," a broker with Trimegah
Securindo Lestari said.
The Rupiah closed at Rp 11,075 against the U.S. dollar on
Friday, higher than its close of Rp 11,700 the previous week.
The JSX Composite Index fell 12.71 percent to 339.02 last week
from its close at 388.34 points the previous week.
Daily average turnover fell 7.69 percent to 183.54 million
shares last week from 198.82 million the previous week.
Daily average transaction value fell to Rp 242.96 billion
(US$22.08 million) last week from Rp 268.68 billion the previous
week. (aly)