Local stocks lose ground on profit taking

Local stocks lose ground on profit taking

JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX)
lost ground yesterday on profit taking, with the main price index
falling 2 percent, brokers said.

The brokers said big brokerage houses such as Merrill Lynch,
Bahana Securities, HG Asia and Jardine Fleming Nusantara were
among the net sellers in the market yesterday after making
massive purchases on blue chip and second-line stocks early this
week.

"The decline in stock prices was basically caused by profit
taking made possible by current volatile trading," a broker with
a joint-venture securities firm said.

Baradita Katopo, a senior analyst with UBS Securities, said
the volatile trading, predicted to continue in the coming months,
showed that investors were still confused over the government's
plan to peg the rupiah to a foreign currency at a fixed exchange
rate under a currency board system.

He said if the government installed a currency board and
pegged the rupiah to a fixed rate of between 5,000 and 6,000 to
the dollar, companies with dollar-denominated debts would be able
to continue their business activities.

"Companies like Astra International, Indofood, Indocement and
other companies belonging to Indonesian conglomerates are
included in this category," he said.

But if the government does not go ahead with the currency
board plan, companies with less foreign debts and which export
products to overseas markets would benefit, he said.

He said companies in this category included Tambang Timah,
Aneka Tambang, Daya Guna Samudera, Berlian Laju Tanker and
Davomas Abadi.

"Trading activities in the local bourse will not stabilize
until there is a definitive stance (taken by the government) on
the currency board system," he said.

Another analyst with a joint-venture securities firm said
disappointing corporate industry results, expected to be released
soon, and renewed political and social concerns would further
dampen market sentiment.

"I think most companies are likely to book lower-than-expected
results in 1997," he said.

Concerns over political and social unrest due to soaring
prices of basic essentials will also erode market sentiment, the
analysts said.

The JSX Composite index declined 10.14 points to close at
494.89 points yesterday from 505.30 the previous day.

Around 500.33 million shares changed hand on the regular
market valued at around Rp 559.66 billion (US$58.91 million)
yesterday.

As stock prices declined, the rupiah continued to remain under
pressure on renewed dollar buying demands by overseas operators
after the government indicated it would not implement the
controversial currency board system in the near future, currency
dealers said.

They said the rupiah, which opened at 9,700 in the morning
session, fell to as low as 9,750 against the dollar before noon
as overseas operators, especially from Singapore, made massive
dollar purchases.

The rupiah ended firmer, however, mirroring Monday's closing
rate of 9,500 against the American greenback. (aly)