Stock prices to remain under pressure this week
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) are likely to remain flat this week as most investors are awaiting the outcome of Indonesia's donors' meeting in Paris this week, securities analysts and brokers said.
They said that local investors, discouraged by the absence of fresh incentives in the country's battered market, would not be tempted to make any major trades until results of the upcoming meeting of the Consultative Group on Indonesia (CGI) later this week are announced.
"I think local investors do not want to make any big trades until they know the outcome of the meeting," Baradita Katopo, head of research at Usaha Bersama Securities said.
"Investors will focus their attention on the CGI meeting," he said.
The CGI, Indonesia's donor group, which is expected to start meeting on July 27, is expected to give Indonesia more than the US$5.3 billion it provided to the country last year.
Baradita said that investors in the country's dire financial market were now focussing their attention on the meeting as loans from the CGI would help spark a positive outlook for the local market.
Head of Socgen Global Securities Goei Siauw Hong said that the loan from the Indonesia's donors was the only positive news likely in the short term for the country's battered financial market.
"The country's long-term outlook is still gloomy and the loan from the CGI is the only positive news in the short term," he said.
Other stock analysts agreed but warned that concerns over the country's security problems would further curtail short-term investors' bullish sentiment in the country's market.
"Despite active trading in the local bourse over the past two weeks, investors still fear a possible outbreak of social and political unrest this week," the director of Harita Kencana Securities, Christina Lim, said.
Supporters of Megawati Soekarnoputri's faction of the Indonesian Democratic Party have said they intend to defy the police ban and go ahead with rallies today to commemorate the 1996 riots, which erupted amid protests over the government- orchestrated ouster of Megawati from the party's leadership.
Analysts fear that the rally could spark widespread violence.
"If there is a big clash, the market will go down," a broker with Mashill Jaya Securities said over the weekend, adding that investors fear that such a rally could lead to a massive riot, like those which hit the capital in the middle of May.
Then hundreds of supermarkets, department stores and shops were either looted or burned.
Socgen's Hong said that trading would be dominated by state- owned companies such as PT Aneka Tambang and PT Tambang Timah.
"Even though the market will likely to go down in the short term, local investors will be able to make business out of these stocks," he said.
Brokers and analysts shared one common view, that as the rupiah remains under pressure, a cloud will remain over the stock market.
"As long as the rupiah remains under pressures, the local stock market will be affected too," Harita's Christina said.
The rupiah closed at 14,075 against the American dollar last week, lower than its close at 13,350 the previous week.
The JSX composite index closed 1.3 percent or 6.67 points lower at 479.56 last week from 486.23 the previous week.
Daily turnover dropped to 311.76 million shares from 402.62 million shares in the previous week.
The average daily transaction value fell to Rp 426.73 billion (US$30.48 million) last week from Rp 475.16 billion the week before. (aly)