Stock trading to remain inconsistent this week

JAKARTA (JP): Stock trading on the Jakarta Stock Exchange (JSX) is expected to remain volatile this week due to uncertainty over the planned currency board system and the tense political situation, securities analysts said.

They said most investors, as in the previous week, were confused whether the government would go ahead with its plan to adopt a currency board system to stabilize rupiah's value against the U.S. dollar.

"The stock market has lost direction because investors were confused about the peg news, and this will likely continue this week," said Tjandra Kartika, head of Research of Mashill Jaya Securities.

Tjandra, like most other analysts, said that if the rupiah was pegged to the dollar at a fixed rate, most local companies such as Astra International, Semen Cibinong, Indocement Tunggal Perkasa and Indofood Sukses Makmur, which have big dollar denominated debts, would survive and continue their operations.

With the rupiah pegged at a fixed rate, it will give local companies more certainty in calculating their business projection.

President Soeharto, however, was reported over the weekend to have indefinitely postponed the plan to establish a currency board system to regulate the rupiah.

According to Singapore's Straits Times: "The draft legislation for the currency board is ready. So, too, is the presidential decree. But President Soeharto has decided not to sign them anytime soon," reported Reuters.

Soeharto had finally given up his peg proposal following strong international opposition to the plan.

The rupiah closed weak at 9,050 against the greenback on Friday last week, down 6.5 percent from its close the previous week of about 8,500 to the dollar.

Most stock analysts said the market expected the Group of Seven (G-7) would end up with something good for the Asian battered economies, including Indonesia.

"If the G-7 meeting has something good for Indonesia, it will send a positive sentiment to the market," Mashill's Tjandra said.

The G-7 nations -- the United States, Japan, Germany, France, Britain, Canada and Italy -- put the Asian crisis as one of their top business agenda in their meeting in London late last week.

However, stock analysts and brokers shared one common view, that the country's economic, political and social uncertainties would cast shadows over trading and business activities on the local market in the coming weeks.

"Trading activities will remain jittery in the coming one or two weeks or even months ahead," director of equities at Bahana Securities Bruce Rolph told The Jakarta Post.

He said most offshore short-term institutional investors, who made one-day trading activities in the local market over the past weeks, would not be tantalized to make any long-term investment in the local market due to persistent volatility lingering in the country.

"Whenever there is uncertainty, there will be no investors making huge portfolio investments," he said.

Most stock analysts and brokers said that they sensed a kind of growing public tension ahead of the presidential election to be held in March. Members of the People Consultative Assembly will convene here from March 1 to March 11 to elect a president, with the incumbent President Soeharto widely expected to be elected to his seventh consecutive five-year term.

"Riots due to spiraling prices of staple foods are likely to increase in the lead-up to the presidential election," one analysts, who asked for anonymity, said, pointing out that similar riots targeting Indonesian-Chinese have occurred over the past few months.

The JSX Composite Price Index close 10.5 percent higher last week to 495.23 points from 448.15 points the previous week.

Daily turnover, however, declined by 40 percent to 517.41 million shares changing hands on the regular market compared to 786.86 million the previous week.

Daily transaction values also fell by 19 percent to just Rp 669.25 billion (US$74.36 million) last week from Rp 829.66 billion the previous week.

Blue chip stocks were mixed last week, with state-owned telecommunications Telkom climbing by Rp 25 to Rp 3,800 and satellite operator Indosat by Rp 275 to Rp 13,925. Cigarette maker HM Sampoerna slipped by Rp 375 to Rp 5,125, while competitor Gudang Garam slipped Rp 425 to Rp 11,200; Bank Internasional Indonesia slipped Rp 50 to Rp 575 and Bank Negara Indonesia Rp 25 to Rp 525. (aly)