Local stocks expected to lose steam this week
Local stocks expected to lose steam this week
JAKARTA (JP): Share prices in the local market are expected to
lose steam this week due to the absence of a foreign funds inflow
into the local bourse and lingering fears over the country's
political and social environment, analysts said.
They said that the massive foreign funds inflow, which allowed
the local benchmark price index to break through the 400-point
key level to 428.98 on Monday, would soon quit the hammered local
bourse.
"Foreign investors are no longer tempted to enter the local
bourse because of the political instability at home," Adrian
Rusmana, head of research of BNI Securities said on Saturday.
Securities analysts said that fears that antigovernment
demonstrations, which have taken place almost daily for the past
few weeks, would turn violent, turned back foreign investors to
their home bases.
"Investors fear that such demonstrations will turn violent,"
another analyst said.
Vonny Juwono, a broker with Trimegah Securindolestri said that
most foreign and local investors, which had placed massive buying
orders on certain blue chip stocks the previous week, would stay
away from the local market after cashing in profits on their
gains the previous weeks.
"Profit-taking will likely mark the trading activities in the
local bourse," she said.
But head of research of Sigma Batara Fadjar Limin Sutandi
said, that despite massive profit taking, the benchmark price
index in the local market would probably hover around the key
400-point level for the whole week.
"Though profit will mark trading activities, the index will
resist at the 400 level," he said.
Trimegah's Juwono said, however, the direction of the stock
prices in the local market would largely depend on the movement
of the other equity markets in the region as there were no fresh
leads at home which would influence foreign investor sentiment.
Securities analysts said that the release of the first nine-
month financial reports of local corporations this week would not
become a meaningful guide to company prospects as most of them
were struggling to cope with an economic slump and huge foreign
exchange losses.
BNI's Adrian said that companies serving the domestic market
and with substantial offshore borrowings had been hammered by the
economic decline at home and have seen their foreign exchange
losses rocket following the rupiah's sharp depreciation against
the American dollar.
Adrian predicted that stocks of corporations with huge
offshore borrowings would became the speculative buying target
this week to benefit from a stable rupiah-dollar exchange rate.
"With a relatively stable rupiah, stocks of companies with
substantial foreign borrowing will be the main target of
speculative buying," he said citing car maker Astra International
as an example.
While the Jakarta Stock Exchange's (JSX) main composite index
fell 2.8 percent (11.33 points) to 392.32 last week compared to
403.65 the previous week.
Daily average turnover, however, soared to 469.17 million
shares changing hands last week compared to 380 million shares
the previous week.
Daily average transaction value also rose to Rp 447.324
billion last week compared to Rp 346.32 billion the previous
week.
Meanwhile, currency dealers said that the rupiah, which closed
at 7,450 on Friday last week compared to its close at 7,500 the
previous week, was expected to advance further to the 7,000 level
against the American dollar this week.
The rupiah, which has strengthened significantly from between
Rp 10,000 and 11,000 per dollar two months ago despite the
political uncertainty, would remain steady this week.
"Possible intervention by the central bank could pave the way
for the currency to hit the 7,000," a chief dealer with a joint
venture bank said. (aly)