Shares end lower led by selling in Indofood

Shares end lower led by selling in Indofood

Bloomberg, Jakarta

Indonesian shares ended lower on Monday, led by selling in food producer Indofood Sukses Makmur on worries the company may delay its plan to sell a stake in its flour unit to the public this year, dealers said.

They said overall sentiment was weak, hurt by losses in most Asian markets and renewed fears that the rupiah may continue to weaken due to rising dollar demand from local companies to repay foreign debts by the end of the month.

The dollar was trading at Rp 9,663, up from its previous close at Rp 9,650, on rising dollar demand from local companies to meet offshore obligations by the end of this month.

"These factors sent negative sentiment to the market, spurring further profit taking," said trader with Paramitra Securities.

The Jakarta Stock Exchange's Composite Index ended down 1.4percent , or 15.769 points, at 1119.898.

Decliners led gainers 89 to 25 with 60 stocks unchanged. Volume was 900 million shares valued at Rp 751 billion, compared with 1.1 billion shares, worth Rp 756 billion on Friday.

Indofood fell 4.2 percent to Rp 1,120 on expectations the company will delay its plan to sell up to 15 percebt of Bogasari Flour Mills through an initial public offering this year, citing unfavorable market conditions.

On the downside, bellwether Telkom dropped 1.5 percent to Rp 4,900 on profit taking and after Telkom's shareholders appointed Arwin Rasyid, a former banker, as president director.

Profit taking also hit shares of gas producer Perusahaan Gas Negara, which lost 9.8 percent to end at Rp 3,000, and automotive company Astra International, which fell 1.9 percent to Rp 12,800 after gains last week.

Bank Negara Indonesia fell 3.4 percent to Rp 1,700 on worries it will book lower first-half earnings due to higher loan provisions.

Shares in oil and gas producer Medco Energi bucked the trend, closing up 1.3 percent at Rp 3,825 on expectations of improved first-half earnings on the back of rising oil prices.

Dealers said they expect shares to trade lower Tuesday on further price corrections in select blue chips.

The Indonesian rupiah ended slightly lower on Monday on dollar demand from local companies ahead of the month end to pay maturing offshore obligations, dealers said.

The dollar closed at Rp 9,663, up from its close on Friday at Rp 9,650.

Dealers said that state-owned oil company Pertamina was the main dollar buyer as the company is boosting its fuel reserves after a recent fall due to cash-flow crunches.

Last week, the government gave the company around Rp 9 trillion in cash, likely to be used to buy dollars to finance imports.

Dealers said trading volume continued to diminish ahead of implementation of Bank Indonesia's new rule on July 14 to curb speculation in the local foreign-exchange market.

"Trading volume has dried out to between US$200 million and $250 million in the spot market currently, from between $400 million and $450 million before the central bank announced the new forex trading rule earlier this month," a dealer with a foreign bank said.

Next month, Bank Indonesia will implement a regulation to restrict the amount of dollars banks can borrow from offshore without underlying transactions to $1 million. Previously, there was no cap.

Central bank officials have said the move is aimed at reducing the amount of speculative offshore money coming into Indonesia, which can destabilize the exchange rate.

Dealers expect the dollar to trade between Rp 9,645 and Rp 9,680 on Tuesday.