Pressure to persist on stock market

Pressure to persist on stock market

A'an Suryana, The Jakarta Post, Jakarta

The Jakarta stock market is expected to move much lower this week on the absence of domestic leads and lingering concern over the situation in the Middle East, one stock analyst said.

Uncertainty caused by the possible U.S.-led strike on Iraq will likely drive stock investors to the sidelines this week, said Jasso Winarto, a senior analyst at Sigma Research Institute.

"The stock market will remain bearish this week amid this gloomy and uncertain situation," he said over the weekend.

Analysts have predicted global stock markets to languish in uncertainty until the end of this year. Last week several U.S. securities firms released their fourth quarter reports with a dim outlook on the global economy.

Underpinning their prediction is not just a volatile Middle East, which could burden the U.S. economy with higher oil prices, but also what they see as slack progress across business sectors in America.

The U.S. economy, the largest in the world, has been in the doldrums since last year. Signs of recovery surfaced earlier this year but failed to gain momentum amid a stream of accounting scandals, following the Enron debacle in September 2001.

With the world's largest economy hanging in the balance, countries elsewhere may need to discount stronger export sales for this year, including Indonesia.

"The combination of those international factors would peg the Jakarta stock index to about 400 this week," said Jasso.

The Jakarta Stock Exchange Composite Index (JSX) has been losing ground since early September when it stood at 427 points.

In last week's four-day trading, which ended on Thursday, the JSX index closed at 408.43 points. Stock and currency markets were closed on Friday for a national holiday.

Jasso said the stock index could easily slip below the support level of 400 should the U.S. launch an attack against Iraq.

But chances of this to happen anytime soon remain slim, as Washington waits out a tougher United Nations resolution to force Iraq to reaccept UN weapons inspectors.

Jasso said some investors might bet on an improvement to market sentiments and buy up stocks that had gone cheap, meaning their action could at least support the level at 400.

"Investors could go for blue chip shares, if they consider that the prices have hit their bottom," he said, explaining that at this level, their shares were likely to go up rather than down.

In the currency market, the rupiah is likely to hover around the same level as last week, said a currency analyst who added that a lack of development on the local economy or political front gave few incentives to trade.

"The rupiah has been stable throughout this year," currency analyst Farial Anwar said.

He said the currency market was instead observing external factors, notably, developments in the Middle East.

He said that if the situation there deteriorated, people would seek protection against uncertainties in the U.S. dollar. That would come even though troubles in the Middle East could benefit Indonesia with higher oil revenues.

Otherwise, Farial said, the rupiah could stabilize at Rp 9,000 to Rp 9,100 against the U.S. dollar for the remainder of the year.

On Thursday trading, the rupiah ended unchanged from last week at 9,015 to the dollar.