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.