Local stock market likely to stay stagnant

JAKARTA (JP): Trading activities on the local stock exchange are expected to remain inactive in the first week of the year as many investors are still on holiday, stock analysts and brokers said.

They said that the absence of fresh leads in the local hammered market would also deter foreign investors from reentering the bourse.

An analyst from a local securities firm said "It is really difficult to find positive guides in the local market at this point of time."

Stockbrokers said that even if there were some fresh buying incentives emerging, that would not significantly encourage investors to the local market as they were still concerned over the country's economic and political crisis.

Stockbrokers said the stock market, which fell 0.9 percent in the last holiday-shortened trading week, would remain volatile in the short-term period mainly due to the country's unresolved political problems.

A broker with a local brokerage firm said, "Though we expect the market to rise, political uncertainty will cast a shadow on trading activities in the local market and it will have negative impacts on share prices."

Looking at the medium and long-term prospects of the local financial market, most securities analysts shared one common view: that the political condition at home would remain the primary factor for foreign investors to asses the prospects of the country's financial market.

Stock analyst Hasan Zein Mahmud, who is also a former JSX president, said that success by President B.J. Habibie's transitional administration to carry out a general election both on time and peacefully this year would certainly prompt investors to consider investing in Indonesia.

"A successful and fair general election will encourage investors to consider investing in Indonesia. But if the process fails, everybody will still be in the dark," he said.

The Indonesian government is scheduled to hold the general election on June 7 to elect members to the House of Representatives and the People's Consultative Assembly, the country's highest legislative body, whose members will convene in November to elect a new president and vice president.

But most analysts have expressed skepticism over the success of the two political events.

Research director of BNI Securities Adrian Rusmana said that if the two political events ran smoothly, the country could expect the return of foreign investors.

"If not, we do not know where the market is leading," he said.

Despite this, some stockbrokers expected the share prices to strengthen slightly in the first week of this year.

An institutional sales broker with Trimegah Securindolestari, Imelda Kwan, said: "We expect the stock market to surge slightly with the main price index breaking through the 400-key point level."

Brokers said that the market had bottomed out and started to regain strength this year following an improvement in the macro economic indicators like lower inflation and interest rates.

"On top of that, corporate earnings are expected to increase due to lowering interests rates in the banking system," Imelda said.

The Jakarta Stock Exchange (JSX) main price index closed 0.9 percent lower (3.81 points) at 398.03 points in the three-day trading week at the close of the year compared to 401.84 the previous week.

The daily average turnover fell to just 129.13 million shares changing hands last week compared to 151.44 million the previous week.

The daily average transaction value also declined to Rp 110.58 billion last week compared to Rp 149,l63 billion the previous week.

Financial analysts said that the rupiah, which closed at 8,100 on the last trading day of 1998 compared to its close at 7,850 the previous week, was expected to remain under pressure as fresh dollar demands by local commercial banks would drag it down.

A chief dealer with a joint-venture bank said, "The rupiah is expected to be traded at between 8,300 and 8,500 early this week."

But currency dealers said that trading volume, which had declined to less than US$50 million ahead of the Christmas and year's end last week, would been remain limited with the central bank expected to step in the market to prop up the rupiah. (aly)