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)