Stock down for seven trading days
Rendi A. Witular, Jakarta
The Jakarta stock market ended lower on Friday for seven consecutive trading days on negative regional issues and jitters over security ahead of the presidential election.
Amid the negative sentiment, the Directorate General of Taxation plans to issue an unfavorable policy of raising income tax for stock transactions, a move considered by brokers as a shortsighted decision that could damage the market.
The Jakarta Composite Index dropped by 2.480 points or 0.33 percent at 743.637 on a volume of 1.84 billion shares worth Rp 915 billion (US$105 million).
Stock analyst David Ferdinandus of CIMB Securities said the decline was driven by a combination of security problems ahead of the presidential election.
Indonesia will hold its first-ever direct presidential election on July 5, with a possible runoff on Sept. 20.
Among security problems are the recent bomb blast in Pekanbaru, Riau, which claimed two lives, and the sectarian clash in Ambon, Maluku, which left more than 35 people dead.
"The decline is still driven mostly by security concerns. But, unlike previous days, the decline is not that sharp because investors have difficulties in selling their stocks due to limited buyers," said David.
David said that aside from domestic issues, the plan by China to slow down its growth, and the growing belief that U.S. interest rates would rise soon, had also fueled negative market sentiment.
"Investors fear that the policies could severely hit the country's exports," he said.
The issues have apparently ravaged regional benchmark stock markets, bringing them to multi-week lows.
In Japan, the Nikkei average ended a six-week low to 11,438.82 after slipping 1.2 percent.
Meanwhile, Syarifuddin Alsyah, a member of the tax reform team for the Directorate-General of Taxation, said the directorate was now in the process of evaluating the current tax rate for stock transactions, and was likely to revise it upward.
"The result of the evaluation will be announced at the end of this year ... Currently, we are not in the position to disclose the new rate," said Syarifuddin, on Friday.
Income tax for share transactions is currently set at 0.1 percent.
According to sources at the tax directorate and in the capital market industry, the directorate was likely to raise the tax to 0.3 percent.
Syarifuddin declined to comment on the figure.
He only said that the rate would be stipulated by a government regulation.
Several brokers, who refused to be named, said that the plan was "foolish", because it was not in line with developments in other countries, which had decided to cut all costs, including taxes, for stock transactions.
"Other countries have decided to eliminate such costs to nurture the development of their stock market, but here the government will decide the contrary ... It seems that we are heading back to the stone age," said a broker from a foreign- based securities house.