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)