Recession fears likely to affect local stocks
Recession fears likely to affect local stocks
JAKARTA (JP): Trading in the country's ailing stock market is
expected to further send stock prices down this week as fears of
a lingering global recession and reports of escalating riots at
home continue to kill market sentiment.
Securities analysts said on Friday that most investors feared
Russia's economic downturn, which has impacted some countries in
Latin America, would further weaken Asian economies.
"Such a gloomy outlook will drag down most major Asian
markets, including Indonesia," an analyst at a joint-venture
securities company said.
The head of research at Vickers Ballas Tamara, Noraya
Soewarno, said many investors had pulled out from the equity
market to avoid bigger losses.
"Investors in the local market also did the same thing. They
sold to cut losses," she said.
The head of research at Usaha Bersama Sekuritas, Baradita
Katoppo, said that the cut-loss trading by foreign investors
on most large-cap stocks last week was the main factor behind the
sharp drop in the market's price index, which dropped below the
300 point level.
"Although the index rose slightly over two consecutive days
before the week's close, the upward trend won't persist," he
said.
Brokers said the daily transaction value, which had
drastically dropped to about Rp 190 billion in the last several
weeks from Rp 600 billion during the market's precrisis period,
would likely fall further in the coming weeks.
"Investors will do whatever they can to leave our market,"
said the head of sales at Mashill Jaya Securities, Antonio
Yongnata, pointing out that there was no more positive news to
prevent investors from shunning the country's battered market.
Stockbrokers said that many foreign investors were actually
encouraged by the strengthening of the rupiah against the U.S.
dollar in the last several days but they had yet to enter
Indonesia on fears of escalating riots.
A number of riots and looting occurred in several towns in
Java last week.
Hundreds of villagers pillaged a teak forest near the town of
Ngawi, East Java, on Saturday following labor unrest at textile
company PT Indorama Synthetic in Purwakarta, West Java.
Stock analysts said that ubiquitous looting and attacks on
stores, plantations and rice mills had become more commonplace
over the past few months as the country's economic crisis
continued to bite, forcing more people into unemployment.
"Social unrest like this will continue to hurt market
confidence," Baradita said.
Stock analysts also said that the strengthening of the rupiah,
expected to test the 10,500 level this week, would also determine
the direction of stock prices.
Currency dealers said the rupiah, which closed at 10,850 to
the U.S. dollar on Friday last week compared to 11,075 the
previous week, would continue to fluctuate below the 11,000
level.
The JSX Composite Index fell 3.97 percent, or 13.47 points, to
325.55 last week from its close at 339.02 the previous week.
Daily average turnover, however, rose to 270.82 million shares
changing hands last week compared to 183.54 million shares the
week before.
Daily average transaction value also increased to Rp 248.11
billion last week compared to Rp 242.96 billion the previous
week. (aly)