Stock market set to remain bearish

JAKARTA (JP): Stock prices in the local market are expected to plummet further this week in line with the global market's bearish trend.

The rupiah, however, is likely to continue gaining more leverage with the slight improvement in the country's monetary indicators.

Currency dealers estimated on Friday that the rupiah would most probably hover above the 10,000 level against the U.S. dollar, but securities analysts said the local stock market would continue to drop given the unfavorable world market sentiment.

"We don't see any good reason for investors to enter the market in short term since there's no positive incentive at all which could uplift sentiment," the head of research at BNI Securities, Adrian Lesmana, told The Jakarta Post on Saturday.

He said foreign investors would continue to shun the country's shattered financial market since placing funds here would no longer not generate any gains.

"Besides, investors would prefer to put their hedge funds in other emerging markets which were not as badly hit as Indonesia," he said.

Other analysts said foreign brokerage firms, which had placed large selling orders over the past two weeks, would continue to do so on certain blue chip stocks to avoid further massive losses arising from the country's bleak economy.

"I am afraid that there is still some leftover foreign selling. So, we will see another free-fall this week," a broker with a local brokerage firm said, pointing out the main price index would drop to the 230-point support level in the coming weeks.

They also voiced concern that unresolved political uncertainty at home would pose another problem for foreign investors to reenter the local market.

BNI's Adrian said investors would remain cautious, fearing possible clashes between the government and supporters of ousted Indonesian Democratic Party (PDI) leader Megawati Soekarnoputri during a planned party congress in Bali starting this week.

Megawati's PDI faction plans to convene the congress from Oct. 8 to Oct. 10.

"Hopefully there won't be a clash ... but if there is, the market will certainly plunge again," an institutional sales broker with Trimegah Securindolesatari said.

Adrian said unresolved political and social problems at home would not only weaken the country's bleak financial market but would also hinder the government's efforts to strengthen the country's collapsed economy.

"We don't know what will happen ahead of the PDI congress but the investors are very cautious," he said.

Stock analysts also said that the fate of the stock market would also depend on the movement of the rupiah, which closed slightly stronger at 10,775 on Friday last week compared to 10,950 the previous week.

The analysts said that dually listed stocks like state-owned telecommunications firm PT Telkom, international satellite operator PT Indosat and mining firm PT Tambang Timah, which are crosslisted on overseas stock markets, would likely fall as sentiment on the rupiah strengthened.

"If the rupiah declines, these stocks will rise. But if the rupiah strengthens, the stocks will likely fall," Adrian said.

An analyst with Trimegah Securindolestari, however, said it was still an opportune time for certain investors to accumulate some quality stocks at bargain prices.

The analyst said that the stock of publicly listed fishing firm PT Daya Guna Samudera and shipping firm PT Berlian Laju Tanker were relatively unaffected by the rupiah's depreciation and the country's crisis.

The Jakarta Stock Exchange (JSX) Composite Price index fell 4.3 percent or 12 points to 263.22 last week from 275.22 the previous week.

Total daily average turnover fell to 203 million shares changing hands from 251.67 million shares the previous week.

Total daily average transaction value also fell to Rp 174.62 billion last week compared to Rp 190.56 billion the previous week. (aly)