Stock prices may fall following mass riots
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) are projected to further decline this week on foreseeable selling pressures, as most investors are nervous about staying in the market due possible issues tied to the weekend riots in the city.
The action of the police and soldiers on Saturday morning in support of the government-backed executives of the Indonesian Democratic Party to take over the party's headquarters here from the supporters of ousted chief Megawati Soekarnoputri ended with mass riots in various parts of the city for the rest of the day and on Sunday.
An executive of a securities company told The Jakarta Post yesterday that the rioting will drive share prices down sharply today and the market performance in the next few days will be strongly dependent on the ensuing events of the PDI incident.
"I think that because the Saturday riot got worldwide media coverage, particularly by the U.S. CNN, it would not be so difficult for foreigners to know the latest political situation in Indonesia," said the executive, who wanted to remain anonymous.
"And I believe investors will be too nervous to maintain large portfolios here," he added.
The executive said most foreign investors realized Megawati is in a losing position following the election of Soerjadi as the party's new chairman by a government-backed congress in Medan, North Sumatra, in late June. "They also anticipate that any activists' move would not return the leadership to Megawati.
"But the action of police and soldiers yesterday was surprising," he added yesterday.
JSX share prices have continuously declined in the past two months, with stock analysts naming political issues as among the reasons.
Several dealers consider the number of demonstrations by Megawati supporters since June a strong indication that the political situation is very unstable.
The JSX's composite index continued to decline from its highest level of 630 points on April 24 to 561 last Friday despite six new publicly offered shares being listed since the end of June.
The dealers said the JSX share prices' plunge actually coincided with the weakening performance on global equity markets on speculations on an increase in interest rates in both the United States and Japan.
"But for Indonesia, the price drops are also attributable to the political situation," a dealer from a foreign based brokerage said.
There is also speculation on the market that certain parties may have expected the price decline and tried to take advantage of the instability.
None of the several stock analysts contacted by the Post last week foresaw a possibility of a technical rebound on big caps which were already corrected, meaning that such speculation would be groundless.
"I think foreign investors will continue to sell their positions on big caps next week," a dealer with a London-based securities company told the Post over the weekend.
"There are some issues in the market and I'm just not sure which is the major reason for the bearish mood of the last few days," a senior trader from a local brokerage said.
PT Lippo Securities' managing director, Kelvin Lee, shared the idea and said: "What was happening last week was a market which was heavily driven by local retailers. But I am sure they will continue to trade shares actively next week."
Lee also predicted that the market would be highly volatile and it would not be easy to take quick "cut loss" or "profit taking" actions.
One deal also pointed out that unlike few years ago, foreign investors who actively make big deals are not only Asian and European investors but also American investors.
"And it's worth noting that those investors have preference on different sectors, meaning that if they liquidate their portfolios simultaneously, several sectors will be heavily hurt," he added.
Selling pressures
The JSX last week recorded a total trading volume of 797.5 million shares worth Rp 1.7 trillion, while the number of listed shares rose to 57.5 billion with the additional share listing of three companies -- PT Ramayana, PT Surya Dumai and PT Fiskaragung.
Foreign selling on big shares last week, coupled with local profit-taking and speculation on second liners, pushed share prices down by 3.2 percent.
Telkom, the largest stock on the JSX, declined by Rp 75 to close the week at Rp 3,325, while Indosat dropped by Rp 550 to Rp 7,525.
Cigarette company HM Sampoerna closed the week Rp 1,300 lower at Rp 23,900, while its rival Gudang Garam lost Rp 575 to close at Rp 9,100.
On the debut of retailer Ramayana on the JSX, the share prices of another retail company Matahari, closed lower at Rp 3,825 against the previous week's close of Rp 4,375.
Other declining stocks were Tambang Timah, which closed at Rp 4,050 (against the previous week's close of Rp 4,275), Semen Gresik at Rp 5,800 (from Rp 5,975), Asahimas at Rp 1,700 (Rp 2,050). Astra International at Rp 2,475 (Rp 2,575), Bank Internasional Indonesia at Rp 5,700 (Rp 6,025), Barito Pacific Timber at Rp 1,575 (Rp 1,750), Bimantara Citra at Rp 2,275 (Rp 2,525), Lippo Bank at Rp 2,625 (Rp 2,850) and Mulia Industrindo at Rp 2,700 (Rp 2,950).
Meanwhile, two of the three newly-listed stocks performed well amid the weakening market. Salt producer Fiskaragung gained 15 percent to close at Rp 1,525 (against its initial pubic offering price of Rp 1,325), while Ramayana stood at Rp 3,575 after reaching its high of Rp 3,750 on Wednesday. Ramayana's initial public offering price was Rp 3,200.
The other newcomer, plywood producer Surya Dumai, closed the week Rp 50 higher at Rp 1,050. (alo)