Share prices on JSX likely under pressure

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) could be under pressure this week as some foreign investors fear that the recent devaluation of the Philippine peso will have a domino effect on the Indonesian rupiah.

Analysts said over the weekend that local investors would follow the selling mood, "not because of the peso news", but rather because of their concern over the central bank's recent move to ban new loans for land acquisition and development.

"This policy affects not only property developers, but also banks," one analyst said. "That's why I am quite sure property and bank shares will remain under pressure," the head of research at Morgan Grenfell, Digby Falkiner, said.

The peso devaluation, other analyst said, would only be cause for concern for foreign investors because they were not really familiar with "our economic fundamentals".

The central bank has for several years floated the rupiah into a basket of foreign currencies, he said. "So it is no longer necessary for Indonesia to devalue its currency like Thailand and the Philippines did," he said.

"Indonesia's economy remains stable, so there's nothing to worry about," another analyst said.

The analyst said that Indonesia's stable economic growth and the long-term nature of foreign debt and controllable short-term private debt were factors which could prevent any further speculation of the rupiah.

A senior dealer at Asian Development Securities said the banking stocks which were under profit taking late last week would continue to decline this week, suffering from the government's new lending policy.

"The regulation will translate into the further decline of several banking stocks," she said.

She said banks allocated a large amount of credit to property sectors over the past few years and the new policy would hurt their annual lending target.

Besides that, local investors were likely to cash in stocks to generate fresh funds for buying new stocks at the primary market, where some companies were expected to sell their new shares.

Companies which are scheduled to make a JSX debut include Lautan Luas on July 21, Maharani Finance on July 16, Bank Arya of the Ongko Group on July 31, and Koey Steel on August 6.

The JSX Composite Index hit a new record high of 740.83 on Tuesday.

However, the index declined over the following days to close the week at 723.42 points, down from 736.60 points in the previous week.

Average daily turnover and transaction performed differently last week as the turnover volume decreased while transaction value increased.

Last week the average daily turnover declined 6 percent to only 312.3 million shares from 332.3 million shares in the previous week.

The average daily transaction value rose 9 percent to Rp 590.88 billion (US$246.2 million) from Rp 537.7 billion in the previous week.

"The JSX composite index is expected to hover around 715 and 720 this week, but won't fall below 700," an analyst from a joint venture securities company said.

Most blue chip stocks lost value last week. State-owned Telkom dropped Rp 250 over the week to close at Rp 3,925, while satellite-operator Indosat was down Rp 275 to Rp 7,425.

Cigarette-maker HM Sampoerna lost Rp 575 to close at Rp 9,425 while competitor Gudang Garam slipped Rp 550 to Rp 9,425.

Most banking stocks suffered losses last week with Bank Negara Indonesia (BNI) down Rp 50 to Rp 1,525, Bank Internasional Indonesia (BII) losing Rp 150 to close at Rp 1,900, Bank Danamon shedding Rp 100 to close at Rp 1,175, Bank Dagang Nasional Indonesia (BDNI) dropping Rp 275 to Rp 1,425, and Bank Niaga losing Rp 200 to Rp 6,600.

Some securities dealers expected foreign funds managers to enter the market in anticipation of better-than-expected second quarter results.

"We're waiting for good second quarter results," a dealer from Asian Development Securities said. (aly)