Political tension likely to worsen stock market
Political tension likely to worsen stock market
JAKARTA (JP): The country's escalating political tension may
further worsen the stock market, which has been severely hit by
the central bank's high interest rate policy over the past
several weeks, analysts have said.
The analysts said over the weekend that fears of the
escalating political tension and the government's commitment to
adopt a high interest rate policy would be the main concerns.
With such a gloomy outlook, investors would normally tend to
sell rather than buy, they said. "At least, they will be on the
sideline until the climate is improving," one of the analysts
said.
Research director of Mashill Jaya Securities, Tjandra Kartika,
told The Jakarta Post that growing campus demonstrations would
become more violent.
He said that with such a worsening condition, security
officials would have not choice but step up efforts to ensure
national stability.
"If that happens, it means there will be more clashes between
students and the security apparatus. The impact of this will be
very negative to the stock trading," he said.
University students have continued to stage daily
demonstration over the past few weeks, demanding the government
make drastic economic and political changes and for President
Soeharto to step down.
President Soeharto issued a strong warning to university
students last week that anyone attempting to force a reform
program outside the state guidelines would be dealt with
accordingly.
"The market perceives that President Soeharto's warning might
mean that the government will employ a security approach to
dampen student demonstrations in the coming days," he added.
Tjandra also attributed the bearish market to increasing human
rights abuses in the country, as foreign investors did not want
to put their funds in a country where human rights abuses were
rampant.
"I think the overall sentiment in the local market will be
bearish," he said.
He said that market fears for a possible hike in the interest
rate of the central bank's short-term promissory notes (SBIs)
could also lead more investors to put their money into banking
deposits.
"I think a higher yield in the banking system will lure
investors to put their funds in the time deposits," he said.
He said that a previous rise of SBI rates failed to shore up
the rupiah's value against the U.S. dollar.
The central bank had raised its SBI rates to as high as 50
percent mid last month but failed to shore up the ailing rupiah
against the dollar.
The rupiah closed at 8,100 against the dollar last week,
slightly lower than its close at 7,950 the previous week.
The analysts said that the planned disbursement this week of
the IMF's US$1 billion aid would be the only good news.
"Though news on the release of IMF loan is positive, it is not
strong enough to whet foreign investors appetites to enter the
market," said Tjandra.
He said the disbursement of the IMF loan would be overshadowed
by heated political tension, the high interest rate policy and
reports on human rights abuse.
The JSX composite index declined by 8.56 percent to 448.52
points last week from 490.48 the previous week.
Total turnover declined by 16.69 percent to 372.89 million
shares exchanging hands last week from 447.56 million the
previous week.
Total value only dropped by 0.5 percent to Rp 485.04 billion
($59.88 million) last week from Rp 487.64 billion the previous
week.
Most blue chip stocks ended lower last week with Astra
International down by Rp 250 to Rp 1,500, Gudang Garam by Rp
1,700 to Rp 9,200, HM Sampoerna by Rp 800 to Rp 5,000, Indosat by
Rp 1,575 to Rp 11,000 and Telkom by Rp 275 to Rp 3,100. (aly)