Local stock market likely to stay stagnant

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)