Selling pressure likely on local stock market
JAKARTA (JP): Trading on the Jakarta Stock Exchange (JSX) is likely to be under heavy selling pressure this week due to increasing economic and political uncertainties, securities analysts and brokers believe.
They said over the weekend that most foreign investors, who stayed on the sidelines last week, would continue to stay away from the markets on the grounds that the country's market was mired in economic and political uncertainties.
"Most foreign investors see that Indonesia is not consistent with its commitment to implement the IMF reform program," head of equities at Bahana Securities Bruce Rolph told The Jakarta Post over the weekend.
He said that investors had been jolted by controversial comments by cabinet ministers not to lift the export ban on crude palm oil and its derivatives on April 22 as stipulated in the newly revised reform program agreed with the International Monetary Fund (IMF).
Minister of Trade and Industry Mohammad 'Bob" Hasan made a controversial remark early last week that he would not lift the ban until domestic prices stabilized.
"Foreign investors question whether Indonesia has serious discipline to commit to reform programs agreed with the IMF," he said.
IMF chief representative in Jakarta Kadhim Al-Eyd is convinced, however, that the ban would be scrapped by the deadline.
And Minister of Finance Fuad Bawazier said in Washington Friday that the government would carry out fully the economic reform program.
"But controversial remarks like that could cause foreign investors to pull back from the country's market," Rolph said.
The government faces an acid test this week of its commitment to the economic reforms agreed with the IMF.
Under the new deal Indonesia has committed to implement the following measures by April 22:
- Enact government regulation in lieu of law to amend the bankruptcy law and establish a special commercial court.
- Establish monitoring system for structural reforms.
- Reduce export taxes on logs, swan timber, rattan and minerals to a maximum of 30 percent and phase in resource rent taxes on logs sawn timber and minerals.
- Transfer claims resulting from past liquidity support to the bank restructuring agency from the central bank.
Securities analysts said the market would be overshadowed by market speculation that Bank Indonesia would likely raise short- term promissory notes (SBI) this week.
Fuad indicated Friday that the government would probably raise interest rates sometime this week to shore up the rupiah.
Last week, amid market expectation about rising rates, Bank Indonesia decided to maintain the benchmark rates at the current level.
Analysts said heightening political tensions, sparked by intensifying demonstrations by students demanding quick economic and political reforms, would also put more bearish pressure on trading activities in the local market.
"Investors are concerned that student demonstrations will spread out to the streets," Rolph said, pointing out that street demonstrations could translate into massive clashes between students and security personnel.
Rolph said that a possible anti-Indonesia resolution by the UN Human Rights Commission being issued in Geneva this week would also cast a shadow on trading activities as foreign investors would definitely shun the market.
"Our country is under the spotlight of the international community now, the slightest breach will attract the attention of the international community," an analyst with a local securities said.
The JSX composite index fell 3.7 percent or 19.86 points to 507.902 last week.
Daily average turnover last week dropped 12 percent to 428.04 million shares changing hands on the regular market compared to 491.39 million shares the previous week.
Daily average transaction value declined 6 percent to Rp 522.67 billion (US$63.74 million) last week compared to Rp 551.46 billion the previous week.
Most large-cap stocks ended lower with state-owned domestic telephone operator PT Telkom falling Rp 300 to Rp 3,600, satellite operator PT Indosat Rp 525 to Rp 12,300, cigarette maker Gudang Garam Rp 300 to Rp 11,200, Bank Internasional Indonesia Rp 125 to Rp 675 and Bank Negara Indonesia Rp 50 to Rp 550. (aly)