Market expected to tumble further
Market expected to tumble further
JAKARTA (JP): Share prices on the local stock market are
expected to slip further this week, weighed down by weak
sentiment on regional markets and concerns over political and
social instability at home, analysts and stock brokers said.
Stock analysts said that market fears of a global economic
recession coupled with persistent worries that the Indonesian
government will adopt a Malaysian-style system of capital control
would force most investors to continue liquidating their
portfolios in the battered local market.
"Market fear of a global recession coupled with the absence of
any positive leads at home will cause most investors to shun the
market in the coming weeks," the head of research at BNI
securities, Adrian Lesmana, told The Jakarta Post last Friday.
Market speculation that the Indonesian government would adopt
a Malaysian-style capital control system sparked panic selling
last week, dragging the main price index on the Jakarta Stock
Exchange (JSX) to a six year low of 271.67 on Friday.
The main price gauge on the local bourse has fallen 33.74
percent from the 310.01 recorded on January 2 this year and by 63
percent from its pre-crisis level of 740.38 recorded on July 8
last year.
The associate director of the state-owned securities house
Bahana Securities, Andre Cita, said that massive sell-offs by
investors last week had left most stocks on the local bourse
undervalued.
"But although stock prices are cheap and have reached a
critical level, there is ominously no sign of a turn around in
the week ahead," he told the Post, adding that the government's
efforts to improve the economy and restore market confidence were
being undermined by political and social uncertainty at home.
"It is just that there is no positive news on the market at
all... rumors are dictating to the market," he said.
The head of sales at Mashill Jaya Securities, Antonio
Yongnata, said that lingering fears of ubiquitous student
demonstrations in the weeks ahead would further dampen trading
activities on the local market.
"The main price index is likely to touch the 250-point level
in the coming weeks," he said.
News reports said that more than 2,000 workers marched on the
provincial parliament building in the country's second largest
city of Surabaya in East Java on Friday to demanded an increase
in wages. Thousands of public transport workers staged a similar
protest in the North Sumatra capital of Medan last Monday.
"Loss of confidence in the government coupled with no signs of
clear cut measures to restore confidence will send the market
down even further," Cita said.
Most analysts and brokers said the market would focus
attention on the fate of several troubled banks, which the
government is expected to announce on Monday.
Finance Minister Bambang Subianto is expected to announce the
fate of several banks currently under the control of the
Indonesian Bank Restructuring Agency (IBRA) on Monday, the
deadline given to bank owners to pay back their debts to Bank
Indonesia.
Like the stock market, currency dealers said that trading in
the rupiah would largely depend on developments in the political
and social situation at home and the market reaction to rumors of
the imminent introduction of a capital control system.
They said the rupiah, which closed at 11,200 against the U.S.
dollar last Friday, was expected to trade in a range between
11,000 and 11,500 this week.
"The rupiah's fate will be determined by the political
situation at home and news on capital control," Robert Z. Toruan,
a dealer with Bank Niaga, said.
The JSX Composite Index fell 52.369 points (16.2 percent) last
week to 271.67 from the previous week's close of 324.04.
However, the average daily average turnover rose, with 220.94
million shares changing hands last week compared to the previous
weeks average daily turnover of 182.50 million shares.
Daily average transactions also increased last week, rising to
Rp 272.29 billion from the previous week's level of Rp 248.15
billion. (aly)