Market facing quiet run-up to MR session

JAKARTA (JP): Mounting opposition to the planned Special Session of the People's Consultative Assembly (MPR) is likely to overshadow the financial markets this week.

Financial analysts said on Saturday that fears that the antigovernment rallies ahead of the meeting would turn violent would dampen the trading mood.

They believed that the rupiah and shares would be under pressure as such worries would prompt money and capital market players to stay on the sidelines.

Both foreign and local investors would likely move sideways as they could not find any fresh leads to keep them in the local shattered market in the short term, the analysts said.

"Escalating worries over the prospect of more violence ahead of the special session will heavily weigh down market sentiment," the head of research at Vickers Ballas Tamara, Noraya Soewarno, said on Friday.

Associate director of state-owned securities firm Bahana Securities, Andre Cita, held the same view, saying that the overall sentiment would remain sober because most investors were concerned about the domestic political environment.

The MPR is set to convene a special session from Nov. 10 to Nov. 13 to set the date and the regulations for the general election next year.

But students and opposition leaders have protested the meeting and demanded that the government cancel it. They have said the meeting would produce legislation that favored the ruling Golkar party.

Analysts said they and investors were worried the rallies could turn violent, leading to riots like those that swept the capital in May and led to the resignation of president Soeharto.

Andre said: "It is just too bad that there are a lot of clouds hanging over the stock market this week," he said. "This is the biggest problem for Indonesia's financial market at the moment,".

Vickers Ballas' Noraya said that foreign investors would certainly continue to discard their portfolio holdings, even stocks in the mining and agribusiness sectors, which are currently the most attractive.

"I think most investors are trying to shun the market despite the cheap price of stocks," she said.

Like other analysts, Johanes Salim of Mashill Jaya Securities said that the direction of the country's financial market would be driven totally by domestic political affairs.

"The market has previously been determined by external factors but now it is domestic affairs which will drive it," he said.

The vicissitudes of the share and rupiah markets have been determined by the movement of the regional markets, especially the Japanese yen against the U.S. dollar, over the past two weeks.

The analysts said that even though the rupiah managed to close firmer, at 7,600, last week compared to its close at 7,850 the previous week, sentiment on the unit remained bleak as most market participants feared building any new long dollar positions ahead of the MPR Special Session.

"Operators will just take a wait-and-see attitude in the lead up to the special session," a chief dealer with a local private bank said.

They said, however, that intervention by state banks would probably keep the rupiah from breaking through the 8,000 barrier in the coming weeks.

A broker with Trimegah Securindolestari said that most stock prices would continue to be under severe pressures this week and the main price gauge would in all likelihood break the 300 level.

"I think persistent selling pressure will cause share prices to decline and push the main price index to plunge below 300 points level," she said.

The Jakarta Stock Exchange (JSX) Composite Index closed 4.2 percent (12.64 points) lower at 300.77 last week compared to 313.41 the previous week. (aly)