Shares are likely to drop again after slight rebound

JAKARTA (JP): After a slight rebound late last week, share prices on the Jakarta Stock Exchange (JSX) are likely to fall again this week despite the International Monetary Fund's decision to inject more funds into the country.

Analysts said that funds from international financial institutions such as the IMF, despite good in nature, would not do much to enliven investors sentiment in the local market due to the country's devastating economic and political situation.

Vickers Ballas' head of research Tamara Noraya Soewarno said Friday: "The country has so many problems this time around ... social and political and economic problems which need to be solved immediately."

"So news on the IMF's fund will not ignite any massive buying spree in the local market," she said.

Following the debt accord between the Indonesian government and the Paris Club Members on Wednesday to rollover the country's US$4.2 billion sovereign debt, the IMF approved on Friday a $940 million payment from its $11 billion bailout funds to help Indonesia overcome its financial catastrophe, manage external payments and improve the rupiah.

Analysts said they believed that unlike shares, the rupiah would perform better this week, partly due to positive sentiment on the IMF's latest loan disbursement.

The rupiah, which closed firmer at 10,950 on Friday last week compared to its close at 11,200 the previous week, continued to hover around the 11,000 level against the U.S. dollar over the past two weeks.

The analysts said that hope for a U.S. interest rate cut this week was also expected to boost the rupiah's stance against the dollar.

Mashill Jaya Securities' head of research Edhi Widjojo said, "The cut in the interest rate will almost have no impact on the local stock exchange."

He said the interest rate cut would not bring much help to the ailing stock trading given the poor condition of the country's fundamental economic indicators.

"With no signs of economic recovery, most investors prefer to put their funds in the money market," he said, pointing out the 60 percent interest rate of time deposits in the banking system.

Noraya said that though some stocks had been cheap, foreign fund managers were still reluctant to enter the hammered local market as political uncertainty and poor economic conditions hinder them to do so.

She said foreign fund managers continue to discard the stocks with strong fundamentals and dollar earnings, like pulp and paper producer Indah Kiat, Tjiwi Kimia and fishing firm PT Daya Guna Samudera.

Stock brokers said that market sentiment would remain bearish this week as market fears for a possible massive riot ahead of the anniversary of a bloody communist coup attempt of 1965.

Bali's Hendra said, "Hopefully there will be no riots but the market feels that there will be some sort of demonstration this week."

News reports said that the military has beefed up its presence in Surabaya, East Java, amid ubiquitous speculation that a large scale demonstration and even riots were being planned for Sept. 30.

Sept. 30 is a historical day for Indonesians as it marks the attempted communist coup leading to the ascension of former President Soeharto into power in 1965.

The Jakarta Stock Exchange Composite index rose 3.55 points to 275.22 last week from 271.67 the previous week.

Total daily average turnover rose to 251.64 million shares changing hands last week compared to 220.94 million shares the previous week.

But daily average transaction value fell to Rp 190.56 billion last week compared to Rp 272.29 billion the previous week. (aly)