Profit taking, fears of longer war to take toll on stocks
Profit taking, fears of longer war to take toll on stocks
Dadan Wijaksana, The Jakarta Post, Jakarta
The Jakarta stock market will likely weaken this week on profit
taking as investors wait for fresh developments in the Middle
East, a stock broker said.
The Jakarta Composite Index increased above the
psychologically important 400 level last week, the first time
since the Iraq war broke out.
The index ended on Friday at 404.43, up 2.7 percent over the
previous week's close of 394.04 points. Daily volume averaged
258.16 million shares worth Rp 232.253 billion (US$26 million)
compared to 207.14 million shares worth Rp 184.278 billion the
week before.
But, profit-taking is expected to put pressure on the market
this week as traders seek to cash in on their gains from last
week's surge in the index, a stock dealer with a local securities
firm said on Sunday.
"This will add to the already negative sentiment in the market
arising from concerns over a longer war in Iraq, which will cast
a shadow on the world's major markets.
"The local market will eventually be negatively affected by
that," he said.
Initially, there was optimism that the war would be a quick
one, marked by a significant surge in stock indices across the
globe. A short war would have little impact on the fragile world
economy.
But, tenacious resistance by Iraqi forces has sent clear signs
that they were not going to go down without a fight, prompting
fears of a longer-than-anticipated war.
"A long war would not only hurt the world economy, but it
would also tend to result in major civilian casualties.
"If that's the case, we'll see much bigger street rallies
opposing the war than we are seeing at the moment. This
definitely has the potential to drag down the (stock) index," the
trader said.
On Sunday, hundreds of thousands of protesters in Jakarta took
to the streets to demand an end to the U.S.-led military strikes
on Iraq.
The rally was relatively peaceful, but there are no guarantees
that rallies will remain so in the future if the war turns out to
be prolonged and causes widespread civilian casualties.
In the currency market, while the Iraq war would continue to
dominate this week's market sentiment, the rupiah is expected to
remain stable at the current level.
Currency analyst Pardi Kendy said on Sunday that
given Bank Indonesia's continued commitment to the stability of
the local currency, he predicted the rupiah would continue to
hover at between Rp 8,860 and 8,920 per U.S. dollar this week.
"The rupiah will further stabilize in the coming week,
maintaining its recent trend," Pardi said.
Despite the war, the rupiah has been relatively stable, thanks
mainly to the central bank's quick response in mounting a defense
of the local unit whenever it comes under pressure.
The rupiah closed last week's trading slightly stronger at
8,905 per dollar, compared to 8,965 the previous week.