Profit-taking may continue to hurt local stock market

Profit-taking may continue to hurt local stock market

JAKARTA (JP): Profit-taking will most likely continue to
dominate trading at the Jakarta Stock Exchange (JSX) this week as
investors remain wary about the future of President Abdurrahman
Wahid's administration, securities analysts have said.

Trading at the Jakarta Futures Exchange (JFX) would also join
the downward trend following a continued lack of interest from
investors.

Securities analysts said the overall outlook in stock trading
would remain bearish despite a strong demand for selected stocks
thanks to a change in fund managers' investment strategies.

The JSX composite index ended the week at 427.91 points, down
from its opening at 451.98 points on Monday.

Adrian Rusmana, a securities analyst at PT BNI Securities,
said share prices mostly dropped last week as a result of profit-
taking, pushing the index down below the psychological barrier of
450 points.

The index, which broke the 450 point level early this month
for the first time since September last year, further increased
on Monday to reach 458 points amid reports that many foreign fund
managers had moved their investments from foreign exchange
trading to the equity market.

Analysts said that the foreign fund managers were forced to
remap their investment strategies after the central bank imposed
a restriction in foreign currency trading early this month.

"The profit-taking occurred when many investors feared that
the social unrest in East Java would spread to other parts of the
country," Adrian said.

He was referring to Wednesday's violent demonstrations in East
Java which left the province's capital Surabaya paralyzed.

Thousands of President Abdurrahman Wahid's supporters took to
the streets, burning down offices of the Golkar Party.

Pro-Abdurrahman masses protested Golkar's support to censure
the President over two financial scandals.

Abdurrahman's visit to East Java on Friday to urge calm among
his supporters failed to uplift the market sentiment as the index
lost 3 percent during the day, closing at 427.91 points.

"Next week some share prices may move upward, but overall
trading will be dominated by profit-taking," Adrian added.

He estimated that the stock index will fall to between 420
points and 432 points this week.

Budi Ruseno of PT Bhakti Investama was more cautious, saying
that the index this week may close anywhere between 416 points
and 430 points.

He added that shares' trading value would continue to fall,
following the passing of the central bank's deadline on a new
foreign exchange ruling.

According to Budi, the ruling, which limits offshore rupiah
trading, has boosted trading value for the past one or two weeks.

Bank Indonesia (BI) imposed a deadline on financial
institutions to settle their forward rupiah transactions by Feb.
7.

Analysts have said that financial institutions then withdrew
their offshore rupiah and invested it in the local stock market.

The move pushed trading values to hit over Rp 1 trillion in
the first week of February, despite the existence of political
tension.

On Monday, JSX trading value stood at Rp 1.6 trillion (about
US$168.42 million) before sliding throughout the week to end at
Rp 451.6 billion.

"Trading value dropped towards BI's deadline on Feb. 7," Budi
said.

The rupiah also ended weaker on Friday at 9,590 to the U.S
dollar, after opening at 9,430.

David Chang, President of PT Vickers Ballas Tamara, said that
pressure from the political situation may continue to dampen the
market.

"We still have some political uncertainties ... the index will
come down flat or lower," he said.

Chang estimated next week's index movement to range between
420 points to 400 points.

"Foreign orders have subsided," he said.

He attributed the JSX's previous rally to foreign investors
readjusting their investment portfolio.

Encouraged by the United States Federal Reserve interest cuts,
he said, foreign investors included Indonesian shares in their
portfolio.

"In January and February foreign investors often readjust
their investment portfolio," Chang added.

Meanwhile, the commodity market at the JFX has yet to take off
since it began operating last December.

Commodities futures exchange brokerage firm PT Danagraha
Futures said that prices of olein and robusta coffee contracts
remained weak with thin trading.

According to Danagraha, olein and robusta coffee prices would
continue their downward trend this week. (bkm)