Stock price drops caused by non-fundamental factors: Ruru

JAKARTA (JP): The continued drops in share prices on the capital market over the last three weeks were caused by non- fundamental factors rather than by declines in the performance of the country's economy.

Bacelius Ruru, chairman of the Capital Market Supervisory Agency (Bapepam), said here yesterday the price falls were caused by the psychological impact of the yen's appreciation against the U.S. dollar and increases in interest rates in the United States.

"The falls in share prices are in compliance with the downturn trend in the world's major stock exchanges," he told The Jakarta Post.

The JSX (Jakarta Stock Exchange) Composite Index, which hit 612.88 points in January this year, the highest level since 1992, continued declining in the last three weeks to close around 25 percent lower at 460 points on Friday of last week. The index rose for the first time in almost three weeks yesterday to close at 458.73 from 457.29 on Thursday.

Ruru estimated that the downward trends will not hold sway for a long time, given the bright outlook of the country's micro- economic and macro-economic conditions.

"The outlook of the country's economy remains promising. We have nothing to worry about," he said.

A number of approaches, including plans to establish stronger legal procedures and to improve the stock trading system, have been set fourth to develop the capital market in the country, Ruru said.

He said the government, for example, will submit a new capital law to the House of Representatives (DPR) in October this year for approval, replacing the present jurisdiction.

Other approaches include the recent establishment of supporting agencies for the market, such as the share clearing and depository agency (PT KDEI), the credit rating agency (Pefindo) and the Public Information Service Office (PISO).

The trading system on the Jakarta Stock Exchange (JSX) will also be fully computerized next January to expedite share transactions.

"These approaches will bring a fresh impetus in stock trading," he said. (hen)