Stock prices may fall following mass riots
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)