Share prices likely to remain volatile
Share prices likely to remain volatile
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
are predicted to remain volatile this week as most foreign
investors would stay away from the market.
Securities analysts said over the weekend that the market
outlook would remain bearish due to a lack of fresh incentives.
"I do not see any reason for investors to enter the market
right now because depositing their money in banks is still much
more profitable," vice president of research of Lippo Securities
David P. O'Neil said.
Stockbrokers said that the gloomy prospects of the trading
activities on the local stock exchanges were also in line with
poor performances in other regional markets.
"I think foreign investors were pure net sellers last week and
they will continue to be so this week," said Christina Lim of
Harita Securities.
She added that most investors had not yet found the Jakarta
stock exchange and other markets in the region favorable
investment spots.
Last week, the central bank cut rates for one-week and two-
week Bank Indonesia short-term promissory notes (SBIs) by one
percentage point each to 19 percent and 21 percent respectively.
Interest rates for one-month and three-month SBIs were lowered
by two percentage points each to 25 percent and 23 percent
respectively.
This was the second time the central bank cut the rates since
it almost tripled the rates of its SBIs to between 27 percent and
30 percent early last month to help shore up the rupiah.
The analysts, however, said that the cut in interest rates was
not enough to incite a buying mood.
They said that the high interest rates also raised concern
that corporate earnings would decline this year. "This is another
factor why stocks are not attractive at present," one analyst
said.
"Most listed corporations have to revise their performance due
to the rupiah depreciation ... but we do not know yet their
revised projection," he said.
However, O'Neil said that the stock market was not that bad
for investments because some stocks were still promising.
"Corporations with strong fundamentals and no high foreign
debts, are still good," he said.
He said companies of this category included the state-owned
telecommunication firm PT Telkom, Indosat, Gudang Garam, HM
Sampoerna, Daya Guna Samudera and Davomas.
"We have put a buy recommendation out for these stocks," he
said, adding that some stocks had been very cheap.
The central bank started raising interest rates early last
month to defend the rupiah.
The rupiah had been under pressure since the Thai government
devalued its currency early July. This caused the Indonesian
currency to drop by about 20 percent since then. The uncertainty
in the money market also created turmoil in the equity market.
"The market is predicted to recover in six to seven months. It
means that the market will stabilize next year," an analyst said.
Last week, the rupiah strengthened against the dollar with
spot rupiah closing at 2,930/2,936 from an opening of
2,950/2,960.
But most analysts could not forecast at what level the rupiah
currency would stabilize and when.
President Soeharto predicted last week that the rupiah would
soon stabilize and find its new market equilibrium.
The President reaffirmed that the government would do its best
to keep the rupiah from a further depreciation and if necessary,
intervene in the market using "sophisticated" instruments.
"This really sends a very positive sentiment to the market,"
said Syahrial, Pentasena's head of research.
Trading activities recovered early this week as investors
reacted to the government's decision to abolish the 49 percent
ownership limit imposed on foreign investors, pushing up prices
of most popular stocks.
However, share prices lost footing before the close of the
week, causing a 7.9 percent drop in the JSX composite index to
546.64.
The average daily turnover rose 11 percent, to 537 million
shares changing hand on the regular market last week from 483
million shares in the previous week.
The average daily value rose 15 percent to Rp 628.9 billion
last week, against the previous week's Rp 546.6 billion.
Fadjar Sutandi said that the index could go down to a 530
level this week or even further down to 480.
"If there is no positive sentiment in the market this week ...
the index might go down to the 480 point level," he said.
Most blue chip stocks declined last week. Telkom dropped by Rp
225 to Rp 3,350 while satellite operator Indosat dropped Rp 275
to Rp 7,500. Cigarettemaker Gudang Garam lost Rp 1,100 to close
at Rp 9,100, while its competitor HM Sampoerna slipped Rp 875 to
Rp 7,350.
Bank Internasional Indonesia dropped Rp 150 to Rp 950, Bank
Negara Indonesia shed Rp 200 to Rp 975 and Bank Dagang Nasional
Indonesia fell Rp 50 to Rp 750. (aly)