Political woes may foil stocks
Political woes may foil stocks
JAKARTA (JP): Stocks on the Jakarta Stock Exchange (JSX) are
likely to remain under heavy selling pressure this week due to
the country's heated political developments and high interest
rates, stockbrokers and analysts said.
They said escalating student demonstrations were likely to
ignite into violent street clashes in coming days making
investment risks soar drastically.
"The country is now facing a political crisis rather than an
economic one," the head of research at Socgen Crosby Securities
Indonesia, Goei Siauw Hong, said.
A stockbroker with BZW Niaga Securities said most foreign
investors had expressed fear that the country's political
instability would dampen trading activities in the local market.
"There is no more positive news. Everyone is afraid to put
their money in the local bourse because of the political
instability," the stockbroker said.
Hundreds of students and workers continued with their daily
demonstrations last week, protesting the government's decision to
raise fuel and electricity prices.
They demanded the government make rapid economic and political
reforms to bring the country out of its worst crisis in decades.
They also demanded President Soeharto to step down after failing
to restore investor confidence in the country.
President Soeharto, however, has threatened to use security
forces to crush any unruly student protests in the future.
"The security forces will take action against whoever disturbs
national stability," the President said before leaving for Cairo
on Saturday for a summit of the Group of 15 developing nations.
Most analysts and stockbrokers shared the common view that the
country's political situation had become so complicated that
economic and monetary moves alone could not effectively
strengthen the economy.
The head of research at Sigma Batara Securities, Fadjar Limin
Sutandi, said the worsening political situation would hurt market
sentiment.
He also said the recent move by Bank Indonesia to raise
benchmark interest rates for its short-term promissory notes
(SBIs) would create heavy selling pressure in the local bourse.
The central bank raised its SBI rates again last week between
4 percentage points and 12 percentage points to shore up the
rupiah against the U.S. dollar.
One-month SBI rates were raised to 58 percent from a previous
rate of 50 percent.
The rupiah, however, failed to strengthen against the American
dollar last week, closing at 9,200 on Friday, much lower than the
previous week's close at 8,200.
Fadjar said the central bank could further raise SBI rates
again in the coming days to defend the rupiah from plunging
further against the American greenback since previous increases
had shored up the currency.
"The market expects the government to raise the one-month SBI
rate to as high as 60 percent," he said.
Analysts said investors would continue to sell their stocks
and deposit their funds in banks which offer higher yields.
Managing director of Harita Securities Christina Lim said the
local market was far from recovery because foreign investors
would likely stay out of the country due to the political risk
factors here.
The JSX Composite Index shed 11.87 points, or 2.64 percent,
to close the week at 436.65 points from 448.52 the previous week.
Total average daily turnover fell 3.42 percent to 360.14
million shares last week from 372.89 million the previous week.
Total average daily value also declined 17.77 percent to Rp
376.67 billion (US$41.58 million) last week from Rp 458.04
billion the previous week.
Most blue chip stocks ended lower last week with Astra
International down Rp 275 to Rp 1,225, Gudang Garam Rp 550 lower
to Rp 8,650, HM Sampoerna by Rp 675 to Rp 4,325, Bimantara Citra
by Rp 275 to RP 650 and Citra Marga Nusaphala Persada by Rp 100
to Rp 550.
Indonesia's financial market was closed yesterday in
observance of Buddha's Day of Enlightenment. (aly)