Share prices fall likely to continue
JAKARTA (JP): The drop in share prices on the Jakarta Stock Exchange (JSX) is likely to continue this week even though analysts say most stocks have bottomed out.
Dealers said uncertainty over the rupiah's direction and high interest rates would remain the major causes of selling pressure.
"Most popular stocks have actually reached their bottom level and are already very cheap. But investors remain uncertain about the rupiah so they are better remain on the sideline," one analyst said.
The JSX Composite Index hit its lowest level since December 1995 on Friday to close the week at 493.96, down nearly seven percent on the previous day.
"It is really a nightmare in the stock market now. I've never experienced such a situation before," one broker said.
Other analysts said the situation was unpredictable.
At current levels, share prices should undergo an upward correction because most have bottomed out.
The market has lost over 30 percent since early July when the Composite Price Index broke the 700 mark.
"But in the reality, everything is different. Selling pressure continues and no one will benefit from the cheap prices," another dealer said.
Most analysts believed the rupiah's stability and the easing of the central bank's tight monetary policy remained the key factors to improve investor confidence.
But they are unsure when such a situation will arise.
"We do not know when the rupiah will stabilize ... If I knew when, I would enter the market and make money," Morgan Grenfell Asia Indonesia's Mirza Adytiaswara said.
The rupiah and other Southeast Asian currencies have been under severe pressure from speculators after the de facto devaluation of Thailand's baht on July 2.
The rupiah has lost over 20 percent since then.
On Friday, the rupiah broke the 3,000 barrier against the U.S. dollar but recovered in afternoon trade to 2,890.
Analysts said the slight rebound did not necessarily translate into a stabilized rupiah because the currency was still a speculation target.
Bank Indonesia, the central bank, nearly tripled the yield on its short-term promissory (SBI) notes early this month to 30 percent in a bid to shore up the rupiah.
The measure strengthened the rupiah the next day but after than it hovered between Rp 2,800 to Rp 2,900 against the U.S. dollar.
The increase in the SBI rate prompted an increase in bank deposit rates. This prompted investors to dump stocks and put their money in banks.
Most bankers, businesspeople and some senior ministers have called on the government to gradually pour liquidity into the market to inject life into the banking system.
They argued that if the tight monetary policy was to be maintained, this would lead to banking defaults and corporate bankruptcies.
State minister of Investment Sanyoto Sastrowardoyo said tight monetary policy would dampen the country's investment climate.
"The problem now is rupiah scarcity and the increasing cost of funds. Business people are not able to work with such highly punitive interest rates," he said.
The JSX composite index fell 14.48 percent or 80.43 points last week to 493.96, its lowest level since December 1995.
Average daily turnover fell 21 percent with a meager 401.80 million shares changing hands last week, compared to 488.60 millions the week before.
Average daily value plunged 61 percent to Rp 468.77 billion (US$ 167.41 million) last week, from Rp 758.48 billion previously.
A senior dealer with a joint venture securities firm said the market could fall further if the government did nothing to improve the monetary climate.
"Previously, we thought the bottom out level was 500 ... but last week the JSX Composite Index broke that psychological level," he said.
The JSX Composite Index has fallen almost 32 percent from its July peak of 740.38.
"Most foreign institutional fund managers have quit the stock market for a while until stocks rebound in the coming months," a Lippo Securities analyst said.
"Well, it is quite difficult to expect the market to recover these days," Edwin Syharuzad, a Pentasena Arthasentosa analyst said.
He predicted the market would continue to deteriorate as people looked for a bottom-out line.
Blue chips dropped last week as PT Telkom slipped Rp 725 to Rp 2,675, Indosat fell by Rp 1,175 to Rp 6,000, cigarette maker HM Sampoerna lost Rp 1,375 to Rp 6,250, while its rival Gudang Garam eased Rp 900 to Rp 8,000. Astra International dropped Rp 700 to Rp 5,400.
Banking stocks plunged with state-owned Bank Negara Indonesia shedding Rp 225 to Rp 925, Bank Internasional Indonesia losing Rp 275 to Rp 825, BDNI slipping Rp 125 to Rp 625 and Danamon falling Rp 125 to Rp 650. (aly)