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)