Stock prices tumble 9.29 percent
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) dropped for a fourth consecutive day yesterday with the main price index tumbling 9.29 percent in sluggish trading.
Securities analysts attributed the share price fall to news of riots and a strong possibility of the government pegging the rupiah to the U.S. dollar to stabilize the country's battered economy.
Fears of further riots sparked by skyrocketing prices of most essential goods dampened trading activities, the analysts said.
Investors also sold stock on concerns that the pegging of the rupiah would result in a sharp increase in interest rates.
The dominant Golkar's announcement of its nomination of State Minister of Research and Technology B.J. Habibie and House Speaker Harmoko as its candidates for vice president did not help the market, they said.
"The announcement will instead send a negative sentiment to the market," one of them said.
The JSX Composite index plunged sharply 45.32 points to close at 442.28 points from 487.61 points the previous day.
About 606.94 million shares changed hands on the regular market valued at Rp 645.66 billion (US$87.25 million).
"Trading activities were sluggish for the whole day from its opening. It was really a bad day," a broker with Trimegah Securities said.
Brokers said that reports of sporadic riots in several towns in the country and recent demonstrations in the capital demanding lower prices of staple goods put pressure on stock prices.
"Riots and demonstrations have worried most investors in the market. Most people were panic cut-loss selling the whole trading day," a broker said.
Stock brokers said that heated political and social conditions had heavily weighed down the market sentiment causing most stock prices to drop including blue chips PT Telkom, Indosat, Tambang Timah which outperformed during a sharp rally the previous day.
Stock analysts said that currently market movement was largely driven by sentiment rather than fundamentals.
"All social, political and economic problems are coming in one direction causing the market to be very fragile. Your decision now has to be based on what happens in social and political affairs," an analyst with a local securities firm said.
As stock prices tumbled, the rupiah remained stable trading in a narrow range between 7,200 and 7,700 against the American dollar on news that the government would establish a currency board system to peg the rupiah to a fixed exchange rate, currency dealers said.
Sport rupiah closed at 7,400/7,600 in Jakarta against an opening of 7,300/7,500. (aly)