Share prices up slightly from second-line stocks

JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) edged up 0.1 percent yesterday on the back of local buying of second-line stocks, stockbrokers said.

Brokers said trading activity remained moderate as the market anxiously waited for news on whether the government would adopt a currency board system to peg the rupiah to a fixed exchange rate with the U.S. dollar.

"The market's not taking any direction now due to uncertainty over the currency board system," a broker with Trimegah securities said.

"Though some local investors bought mid-size stocks with strong fundamentals," the broker said.

Stock analysts said that if the government went ahead with its plan for a fixed exchange rate regime, the stock market would likely tumble because most investors would switch their investments to time deposits in the banking industry.

The analyst said the adoption of a currency board would result in the increase of interest rates.

Unrest

"When this happens, the stock market would likely decline further," he said.

Edhy Widjojo of Mashil Jaya Securities said that persistent uncertainty over the country's political situation and sprouting social unrest in several towns would further force most foreign investors to make one-day trading transactions rather than long- term investment plans.

"I think the market will go back to its normal condition soon after the presidential election in mid-March," he said.

The JSX composite index closed up 0.47 points at 472.67 from 472.20 the previous day.

Total turnover was 479.37 million shares on the regular market valued at Rp 563.23 billion (US$62.89 million).

The rupiah ended its trading in a stronger position against the American dollar, closing at 9,000/9,200 from an opening of 9,700/9,800 in the morning trading session.

Currency dealers said speculation that the government planned to postpone its currency board plans for six months caused confusion in the market with some overseas operators liquidating their long dollar positions.

"Some players were taking profits after selling down their dollar positions," a dealer said.

Currency dealers said Tuesday's government announcement of a new governor for the central bank did not significantly influence sentiment in the currency market as governor Soedradjad's dismissal was seen as a signal to adopt the currency board system. (aly)