Stocks hit new high before plunging

Stocks hit new high before plunging

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index recorded a 12-month high at
524.892 during the intraday trading on Wednesday before profit
taking from investors dragged down the index to 515.713, or 3.830
points lower than Tuesday's 519.32.

Profit taking actions also cost the rupiah as it plunged
against the U.S. dollar after trading at a two-year high.

Stock analyst Budi Ruseno from Bhakti Capital Indonesia said
the index had reached its second resistance level which made it
volatile for market players to take profit.

"The index has hit its second resistance level with the
psychological effect that the pressure on selling is greater than
buying," said Budi.

Some of blue chip shares became the victims of profit taking
including the country's largest cigarette producer PT Gudang
Garam whose shares fell by 2 percent to Rp 10,400.

Automaker PT Astra International also dropped 2.7 percent to
Rp 3,625, and telecommunication company PT Indonesian Satellite
(Indosat) fell by 1.1 percent to Rp 9,250.

Another cigarette company, PT HM Sampoerna, ended flat at Rp
3,925, while PT Telekomunikasi Indonesia (Telkom) closed
unchanged at Rp 4,675.

Budi also explained that the index decline was also driven by
the weakening of the rupiah which on Wednesday's trading closed
marginally lower at Rp 8,230 from Rp 8,210 on Tuesday.

The decline in the rupiah was caused by profit taking from
market players amid fear of possible intervention by the central
bank if the rupiah continued its rally against the greenback to
the level of Rp 8,100.

The newly elected central bank governor Burhanuddin Abdullah
had previously said that further strengthening of the rupiah
would hurt local exporters.

Analysts said that such a comment affected the market to
become more cautious.

As for Thursday's trading Budi forecasted that the composite
index was likely to be mixed as investors were inclined to track
the weakening of the rupiah.

However, he explained that the underlying sentiment remained
bullish on local stocks because of the large idle capital owned
by local investors.

Analysts had previously said that the total idle capital was
estimated at around Rp 800 trillion.

Another positive sentiment was caused by the central bank's
move on Wednesday evening to cut the benchmark rate of one-month
Sertifikat Bank Indonesia promissory notes to 10.07 percent from
10.27 percent.