Rupiah fall continues to worry investors
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) are likely to remain weak this week as concerns over the falling rupiah will continue, analysts said.
The rupiah reached an historic low of Rp 3,725 against the U.S. dollar before recouping at Rp 3,640/3,650 at Friday's close.
"I think the rupiah's continuing falls are likely to keep market sentiment bearish ... and the rupiah will remain the key factor affecting the stock market this week," Harita Securities president Christina Lim said over the weekend.
Currency dealers attributed the continued decline in the rupiah to the combination of weakening regional currencies, pressures from foreign fund managers and the high demand for dollars from local companies.
"High demand by the Indonesian corporate sector to purchase dollars will continue to cast a shadow on foreign exchange trading this week," a local bank dealer said last week.
Stock brokers said that the worsening currency trading situation would create a bearish sentiment in local stock trading.
"The rush for dollars caused panic selling on the Jakarta stock bourse last week," one dealer with a local brokerage house said.
The brokers estimated, however, that good shares would become the target of choosy investors despite the unfavorable condition of overall trading activities.
"But the prospects for recovery will remain thin ... if not even worse," one broker said.
On Friday alone, the JSX Composite Index lost 21.45 points to close at 515.45 in thin trading with 434 million shares worth Rp 481 billion changing hands.
"The market seems to have lost its direction as a direct impact of the weakening rupiah," Lim said.
Brokers also shared Lim's view saying that most investors were confused by the direction of trading activities in the Jakarta bourse.
Brokers said that the fact that more banks planned to increase their deposit rates would make the stock market even less attractive.
"With the rise of deposit rates, most investors would find bank deposits even more tempting," a dealer with Asian Development Securities said.
They said that easing the government's tight crunch policy remained the key factor to boosting stock trading.
Bank Indonesia's Governor Soedradjad Djiwandono last week said that the government would continue to lower the interest rates of Bank Indonesia certificates (SBIs) to improve economic liquidity.
The JSX Composite Index lost 6.26 percent last week with the index closing 34.44 points down to 515.477.
Daily turnover declined 4.3 percent to 275.02 million shares changing hands on the regular market last week compared to 286.94 million shares in the previous week.
Daily value also fell 15.9 percent to Rp 357.08 billion (US$108.20 million) last week against Rp 413.91 billion recorded in the previous week.
Securities analysts said that the main price gauge might further go down below the 500 level in the coming weeks and would not recover to its previous high of 740 on July 7.
"In this current situation, ...nobody can do anything," Lim said.
Most big-capitalized stocks lost ground last week with state- owned telecommunication falling by Rp 100 to Rp 3,450, HM Sampoerna by Rp 1,000 to Rp 5,700, Bank Internasional Indonesia by Rp 200 to Rp 775, Bank Negara Indonesia by Rp 100 to Rp 800 and Bank Dagang Nasional Indonesia (BDNI) by Rp 100 to Rp 600. (aly)