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)