Stock market remains gloomy, awaits news on Iraq
The Jakarta Post, Jakarta
After falling more than 4 percent last week, the Jakarta Composite Index is set for further losses this week amid bearish market sentiment, resulting from fears of a war in the Middle East, market players have said.
"News of a war in Iraq would again play a crucial part in determining where the global markets, including Indonesia, aregoing this week. And since a war looks more likely to be the option, the markets will remain under pressure," a stock analyst with a local bank said over the weekend.
"I forecast the index to fall further below 380 points," He said, adding that the probability of war was more likely because the U.S. seemed to be pushing ahead with its bellicose attitude on Iraq.
The prospect of U.S.-led military strikes on Iraq pushed the index last week down to 388.44, after hovering above 400 points the week before.
Last week's daily volume averaged 308.08 million shares, valued at Rp 232.9 billion (US$25.8 million), also down compared with the previous week's 257.76 million shares, worth Rp 241.5 billion.
He added that if the fears materialized, markets across the globe would be feeling the pinch of the strikes as they would delay the rebound in the world's economy, if not heading for another round of depression altogether.
"But, in Indonesia, the impacts would be worse, because the attack would encourage radicalism by radical movements here. By then, investors would rush in to take 'sell positions', which would further sink the index," he added.
Indonesia, the world's largest Muslim country, has been hit by waves of anti-U.S. movements in the last couple of years.
Street rallies against Westerners flourished here in late 2001 following the military attacks on Afghanistan carried out by the U.S. and its allies.
Some of militant groups also conducted sweeping operations against Westerners in various part of the country, prompting, at that time, several foreign companies to temporary halt their business operations.
The absence of good news on the domestic front would also add to the gloomy sentiment in the market. "There is relatively no positive news domestically that can bring about optimism in the market," he added.
Meanwhile, the movement of the rupiah this week would also rely on the progress in the U.S.-Iraq standoff, a currency broker said.
"War would threaten the rupiah's recent steady position. It would place the rupiah under strong pressure as it would prompt speculative action against the unit," the broker said.
Last week, the local currency managed to stabilize against the U.S. dollar, closing at Rp 8,850, not that far from the 8,893 close the week before.