Shares end lower on selling in Medco

Shares end lower on selling in Medco

Dow Jones, Jakarta

Indonesian shares ended lower on Monday, led by continued selling
in gas and oil producer Medco Energi after the company set the
price for its secondary offering at a discount, dealers said.

In addition, sentiment remained weak after the government
announced that the inflation in July rose 7.84 percent on year
largely due to higher basic food prices, dealers said.

The higher inflation is expected to spur the central bank to
increase the one-month key Bank Indonesia Rate which currently
stands at 8.5 percent.

"Overall, the market continued to consolidate after the main
index hit a record high last week," said a trader with a local
securities firm.

The Jakarta Stock Exchange's Composite Index shed 0.3 percent,
or 4.08 points, to 1,178.22.

Decliners led gainers 81 to 33, with 70 stocks unchanged.
Volume fell to 1.55 billion shares valued at Rp 1.33 trillion,
compared with 2.75 billion shares valued at Rp 4.1 trillion on
Friday.

Medco dropped 4.7 percent to Rp 3,050 on investors'
disappointment with the company's plan to sell 899 million
shares, or a 30 percent stake in the company, by issuing global
depositary shares at Rp 2,850 per share, well below the current
market price.

Bellwether Telkom also took a hit, falling 0.9 percent to Rp
5,500 on growing worries over stiffer competition after
Hutchinson Telecommunications International Ltd. said last week
it will enter the Indonesian market.

Bank Danamon lost 2.7 percent to Rp 5,450 on profit-taking
after sharp gains last week on expectations of solid first-half
earnings.

On the upside, Bank Rakyat Indonesia gained 3 percent to Rp
3,300 after it reported first-half net profit rose 13 percent on
year due to an increase in net interest income.

Dealers said they expect Indonesian shares to trade slightly
lower on Tuesday, led by further selling in Medco and Telkom.

Turning to the currency market, the rupiah closed higher
Monday as supply of the local currency in the interbank money
market was tight following the introduction of a new clearing
system, dealers said.

The dollar closed at Rp 9,775, compared with Rp 9,810 on
Friday.

Dealers said it was hard to find rupiah in the market as
banks, unfamiliar with the new clearing system, kept their funds
to make sure they had enough rupiah.

"Banks are still adjusting their liquidity needs with the new
clearing system," said a dealer with a foreign bank.

"For the time being, they are preferring to keep their excess
rupiah funds."

As a result, the overnight rupiah interbank rate stayed
between 25 percent and 30 percent on Monday, up sharply from the
usual 5 percent-6 percent level, dealers said.

They said banks might need around one week to get familiar
with the new clearing system.

Bank Indonesia now conducts the clearing once a day, in the
afternoon, compared with once in the morning and in the afternoon
previously.

Dealers expect the dollar to trade lower to Rp 9,765 on
Tuesday, with upside resistance expected at Rp 9,800.