Share prices expected to remain stagnant
JAKARTA (JP): Share prices on the local market are expected to remain stagnant this week, with foreign investors continuing to shun the market as a result of the worsening political and social situation in the country, according to securities analysts and brokers.
They said foreign investors were still worried that persistent students street demonstrations, which have become a common sight in the capital over the past few weeks, could turn violent at any time.
A securities analyst at a joint-venture brokerage said that political tension which left the market unscathed in recent weeks was now likely to dampen sentiment ahead of the year-end holiday.
"The most optimistic scenario is that share prices will remain stagnant, but the most pessimistic scenario is that they will decline sharply," the analyst said.
A sales broker with Trimegah Securindolestari, Vonny Juwono, said a lack of positive leads at home would make share prices on the local market highly dependent on the movement of other equities markets in the region.
"When regional markets rebound, then our market will follow suit. But when regional markets go down, our market will endure the same fate," she said.
The head of research at Mashill Jaya Securities, Edhi S. Widjojo, shared the view that the market would remain under pressure toward the end of the year given that foreign funds were unlikely to reenter the country before early 1999.
"Most foreign fund managers do not have Indonesia on their investment list for the time being," he said.
Stockbrokers said foreign investors currently active in the country were engaged in speculative trading.
The Jakarta Stock Exchange (JSX) main composite index slid 0.5 percent (1.92 points) to 390.39 last week from the previous week's close of 392.32.
Last week's average daily turnover fell to just 283 million shares valued at Rp 237.91 billion, compared to 469.17 million shares valued at Rp 473.23 billion in the previous week.
Stockbrokers said transactions volume and value dropped because most foreign investors steered clear of the market.
In times of bearish sentiment, investors would be well advised to scrutinize the investment potential of individual firms, Vonny said.
"Investors would be better to watch certain firms closely and try to look for attractive spot levels," Vonny said.
However, some experts said that tracking the fundamentals of the country's corporations was no longer a meaningful guide for investors because nearly 80 percent of the 289 listed firms are on the brink of collapse as a result of the economic crisis.
They said the steep depreciation in the value of the rupiah against the U.S. dollar had caused the foreign debt of local firms to increase by up to tenfold.
Currency dealers said the rupiah would also remain directionless this week, with most market participants, especially those from overseas electing to remain on the sidelines.
They said the rupiah was expected to trade at between 7,000 and 8,000 against the U.S. dollar in the coming weeks. Last week the rupiah closed at 7,525, down slightly from its close at 7,450 in the previous week.
The government has expressed optimism that the rupiah could advance to as high as 6,500 against the dollar by the year's end due to the easing of interest rates.
Financial analysts said the target was feasible because the central bank, Bank Indonesia, would be converting dollar loans from international institutions into rupiah between now and the end of the month, which in effect would prop up the local currency. (aly)