Stock market likely to slide further
JAKARTA (JP): Shares prices on the local stock market are likely to slide further this week as profit taking may dominate the trading.
Securities analysts said on Saturday that the absence of any fresh leads would also push most investors to sideline the trading floor.
An institutional sales broker with Trimegah Securindolestari said, "I think the general tone is that stock prices will continue to decline due to lack of positive impetus."
BNI Securities' head of research, Adrian Rusmana, said that uncertainty in the country's political environment was marked by endless antigovernment rallies and would continue to scare investors away from the country's shattered market.
He said that lack of foreign investors' confidence in the government would prevent them from placing bulk portfolio investments here.
"Since the foreign investors' confidence is not restored yet, they will continue to dump the stocks to cash in profits," he said.
Mashill Jaya Securities' head of research, Edhi S Widjojo, shared Adrian's view, saying that the rise of stock prices in the past few weeks was driven by external factors rather than by domestic factors.
He said the U.S. interest rate cut by 0.25 percentage basis points to 4.75 had triggered most investors to enter the market.
"The bullish trend resulting from the interest rate cut is over, and it is now the time for investors to take profits," he added.
Stock analysts and brokers said the upward trend in the regional market, which became one of the important factors in pushing up prices of local stocks last week, has also lost its strength.
A stronger rupiah could incite active trading but such a possibility would be marginal because Indonesia's currency, which gained a strong footing early last week, would also likely to lose its power, they said.
The rupiah, which hit an eight-month high of 7,150 last Wednesday, slid back to 7,800 on Thursday and to 7,850 on Friday following a controversial statement by the country's senior economic minister Ginandjar Kartasasmita. He said that the ideal level of rupiah-dollar exchange rate would be between 7,000 and 8,000 to maintain the competitiveness of the country's exports.
Unlike other analysts, Edhi said he believed share trading would be much determined by the rupiah direction rather than other factors.
"So if the rupiah gains ground, then the shares would gain a footing," he said.
The analysts said that a weaker rupiah, which was expected to hover around 7,900 this week, would force investors to sell stocks of companies with huge foreign debts.
However, Adrian said that a weaker rupiah could provide an opportunity for several stocks, especially those of resources- based companies.
He said companies which are also listed overseas could benefit from the lower rupiah, such as state-telecommunications firm PT Telkom, international call operator PT Indosat and mining firm PT Tambang Timah.
The weaker rupiah would make their stocks overseas cheaper and this could trigger active trading, he said.
The Jakarta Stock Exchange Composite Index ended 7.1 percent lower to close the week at 313.41 from 337.58 the previous week.
Daily average turnover, however, rose to 259.76 million shares changing hands last week compared to 222.32 million shares the previous week.
Daily average transaction values rose to Rp 290.38 billion last week from Rp 261.48 billion the previous week. (aly)