Stock market predicted to be bearish this week

JAKARTA (JP): Trading on the Jakarta Stock Exchange (JSX) is likely to remain bearish this week due to a combination of weak regional markets and lower-than-expected third quarter results from local companies.

Securities analysts and brokers said bearish trading in regional markets would certainly affect stock prices on the local bourse.

"With many listed companies reporting lower than expected third-quarter results, the prospect for recovery will be slim," an analyst from a local securities company said.

Head of Sales at BZW Niaga Securities, Adnan Tan, said that the market had not recovered yet despite a technical recovery on strong support for the listing of state-owned company PT Aneka Tambang last week.

"Based on the long-term view, the bearish situation will continue in the coming weeks," he said.

Other analysts echoed this, saying that the trend of JSX stock prices would continue to be downward in the coming weeks.

They said the JSX Composite Index, which recovered slightly at the end of last week, would weaken again and could approach the 350-point level.

"After breaking the 400-point level last week, we expect to see the price indicator go down further to 350 points toward the end of the year," an analyst said.

The head of research at Trimegah Securities, David Chang, shared the same view. He said market sentiment would continue to go down because there was no positive sentiment in the market.

"There is no new fresh incentives in the market and the stock prices will remain bearish for the coming three weeks," he said.

Despite such a gloomy outlook, some analysts voiced optimism. suggesting that it was time to buy for certain selected stocks.

Lippo Securities' head of research Jos Parengkuan said investors should start looking at the opportunities available in the stock market.

"Every crisis presents crises and opportunities. In our industry, the danger lies in the potential corporate bankruptcies which could render their shares worthless.

"Every crisis also opens up opportunities to acquire fundamentally good shares at cheap prices."

He said investors should give up thinking that the market would reach its bottoming-out level.

"The market will never reach bottom-out level. We think that the economy has to hit the bottom and that the stock market may come down further in the meantime.

"But let's not forget that the market will recover earlier than the economy," he said.

Jos said that he based his analysis on the cheap price of some JSX stocks which had declined drastically over the past three months as the impact of the currency crisis hit hard.

"Certain stock prices have declined so much in the last three months that they are unlikely to fall much further from here on," he said.

At the same time, Lippo Securities' president Charles De Queljoe said that the securities firm was considering lowering the interest rate the firm charged on its margin facilities for certain retail investors.

"Both the economy and rupiah are still miles away from being stable and share prices are still vulnerable to further corrections. So far we've been right although it comes at the expense of our transaction volume," he said.

The JSX composite index closed 10.169 points higher to 401.708 points on Thursday last week. There were only four trading days last week as the bourse was closed Friday in observance of the Ascension Day of Prophet Muhammad.

The average total daily turnover was 326 million shares compared to the previous week's 350.4 million shares.

The average total daily transaction value was Rp 387.81 billion (US110.8 million) against the previous week's Rp 320.20 billion.

Most blue chip stocks closed higher last week with state-owned telecommunications firm PT Telkom gaining Rp 25 to close at Rp 2,675, satellite operator PT Indosat rose by Rp 275 to Rp 8,275, cigarette maker PT Sampoerna closed up Rp 125 to 4,850, its competitor Gudang Garam closed Rp 275 higher to Rp 7,750.

But most banking stocks lost ground, with Bank International Indonesia falling Rp 25 to Rp 475, Bank Negara Indonesia by Rp 25 to Rp 575 and Bank Dagang Nasional Indonesia (BDNI) was unchanged at Rp 400. (aly)