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)