Stock market expected to remain under pressure
Stock market expected to remain under pressure
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX)
are expected to remain stagnant this week as the bearish
sentiment pervading regional markets is likely to cast a shadow
on trading activities in the local bourse, stock analysts and
brokers said.
They said that the absence of any fresh leads in the local
market following last week's sharp losses would prompt most
offshore institutional investors to continue unloading the stocks
they bought the previous weeks.
"The market will remain stagnant this week as investors have
not found any positive incentives in the local market," Hendra
Sunarto, a chief dealer with Bali Securities said.
Hendra said most foreign institutional investors, who had made
large buying orders the previous weeks, would continue to shun
the local bourse due to persistent uncertainties on the country's
political and economic fronts.
"Investors are still greatly concerned with all these
uncertainties," another analyst with a joint-venture securities
firm said.
Analysts said market fears of another outbreak of social
unrest ahead of the commemoration of the country's independence
day on Aug. 17 would force most investors to steer clear of the
local market.
"Investors in this market, especially the foreign ones, still
fear more social and political rioting prior to Aug. 17. And this
causes them to shun the market," Bali's Hendra said.
He said that the absence of positive leads amid regional
bearish sentiment could drag the benchmark price index further
down to lower than the 420-point level.
"If the regional markets continue to remain bearish, the main
price index might go down further to 400," he said.
He said that trading activities in the local bourse would only
recover slightly after Aug. 17.
But other analysts predicted that stock prices on the Jakarta
Stock Exchange (JSX) should rise slightly this week on a
technical rebound following the sharp plunge of the benchmark
price index by more than 12 percent last week.
"Last week's sharp fall has made stock prices cheap and it is
now time for investors to buy them back," Christina Lim of Harita
Kencana Securities said.
Analysts and brokers also said that the movement of the rupiah
against the U.S. dollar would determine the movement of stock
prices in the local bourse.
The rupiah closed at 12,800 against the U.S. dollar Friday,
1.9 percent stronger than its close at 13,000 at the end of the
previous week.
Brokers said that the vicissitudes of the rupiah against the
American dollar would determine the prices of dollar denominated
stocks like state-telecommunications company PT Telkom, state
international satellite operator PT Indosat and state tin miner
PT Tambang Timah.
As they account for 25 percent of the total market
capitalization, their movement would determine the main price
index, the JSX Composite Index, said Mashill Jaya Securities'
head of research Edhi S. Widjoyo.
As some currency analysts have predicted that the rupiah
should test the resistance level of 12,500, the prices of these
dual-listed stocks will likely drop due to arbitrage selling.
In addition, investors were a bit disappointed by news that
Telkom's privatization plan is to be delayed due to technical
problems the company is facing currently.
"Such news has killed investors' bullish sentiment on the
stock," another stockbroker said.
The Jakarta Stock Exchange composite index closed 12.1 percent
lower or 58.1 points down at 423.613 last week from 481.71 the
previous week.
Daily average turnover fell to 170.76 million shares changing
hands last week from 247.74 million the previous week.
Daily average transaction value also dropped to Rp 210.30
billion (US$16.4 million) last week from Rp 333.93 billion the
previous week. (aly)