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.