Stock, rupiah markets still gloomy over Iraq crisis
The Jakarta Post, Jakarta
With a war in Iraq being possibly only days away, the Jakarta stock market this week is expected to remain depressed as jittery investors stay away, a dealer said.
He said the gloomy tone would also be seen in global stock markets as pro-war hardliners continued to campaign for an immediate U.S.-led attack on Iraq.
"The hardliners, such as the U.S., Britain and Spain, look to be rushing headlong for the war, prompting fears that they will still go for it even without the support of the UN," a local stockbroker with a European bank, who declined to be named, told The Jakarta Post over the weekend.
On Sunday, the leaders of the three nations who are in favor of military action against Iraq met on Portugal's Madeira island as part of what analysts say is a last-ditch push towards launching military action in Iraq.
"This sends signals that the pro-war countries will do whatever it takes to justify their desire for a war, even though we know that Iraq has been supportive in allowing its weapons facilities to be inspected by the UN," he said.
This negative sentiment would continue to weaken the market and the stock index as a result, he added.
Depressed by uncertainty over the Iraq crisis, the Jakarta Composite Index has been on a declining trend over the past few weeks.
Last week's trading saw the index drop to 387.880, down 1.913 points from the previous week with the daily volume averaging 311.36 million shares worth Rp 208.59 billion (US$23.4 million) compared to 246.35 million shares worth Rp 178.18 billion the week before.
The drop was the second consecutive weekly fall.
It is feared that a war will send world markets plumeting as it could delay an expected rebound in the already fragile global economy.
Worse still, a war could possibly send the world into another global recession.
On the currency market, expected capital flows from continued sales of state assets will limit the rupiah's bearish mood amid gloomy global sentiment, a local trader said.
"While the overall mood is negative, flows of capital will help to partly overcome fears of anti-U.S. protests should war break out," she said.
Indonesia, the world's largest Muslim country, has been hit by waves of anti-U.S. rallies over the past few years. In 2001 following the U.S.-led attack on Afghanistan, anti-U.S. rallies were a regular occurrence here, hurting investor confidence and the rupiah.
The national unit ended last week's trading at Rp 8,915 to the U.S. dollar, lower than the 8,880 recorded at closing the week before.