Stocks plunge to four-year low after terrorist attack
The Jakarta Post, Jakarta
The Jakarta Stock Exchange main index plunged on Monday to its lowest level in four years as investors took fright at the country's economic prospects following the massive bomb explosions over the weekend in Bali.
On the currency market, possible Bank Indonesia intervention helped stemmed the rupiah's slide at 9,330 against the U.S. dollar, though still much lower than 9,010 on Friday's closing.
Analysts predicted further falls in both markets, as investors expected more details of the impact of the terrorist strike on the economy to emerge in the coming days.
"It was panic selling," said stock market analyst Fajar Hidayat of PT Trimegah Securities. "Investors are concerned at the impact the terrorist strike will have on the economy."
The Jakarta Stock Exchange (JSX) Composite Index dropped 38.99 points to end at 337.47 in the weakest showing since April 1998.
Worsening the fall, Fajar said, was a weak global market that in last week's trading had dragged the JSX index down to 378, from around 400.
But investor worries have now shifted to the local economy because of the terrorist strike that killed at least 182 people, mainly foreign tourists.
The tourism sector is one of Indonesia's important economic growth engines, with its ability to bring in foreign exchange earnings, spur local tourism businesses and absorb employment.
"Tourism accounts for some 4 percent of our gross domestic product (GDP)," said Fajar, referring to the total value of products and services a country produces within a year. "On average it contributes some US$ 4 billion in foreign exchange revenue per year."
Stocks fell across the board, led by a 19 percent drop, to Rp 2,400, by market heavyweight PT Telekommunikasi Indonesia, he said.
According to him, at their current prices, many stocks such as Telkom had become attractively cheap. Bargain hunting might set in to stall a further slide in the index or even prompt a mild rebound.
Drawing from the experience when the market fell for three straight days after the bombing of the JSX building in 2000, Fajar predicted a further weakening.
"But I doubt the index will break the 300 level," he said, estimating that trading over the next few days would be within the range 328 to 343.
The current level, 337, only comes close to those in April 1998 when the financial crisis was at full steam and the country was heading for a political showdown between then President Soeharto and demonstrating students.
Although the economy and political stability have improved since, neither is stable. Pressure is mounting from the prolonged global economic downturn as it spells dry export markets and a worsening of the five-year outflow of foreign capital.
A treasurer at a foreign bank said the rupiah was helped by Bank Indonesia intervention, which he heard had amounted to $13 million to $15 million.
Piles of foreign debt payments and other U.S. dollar payables weighed heavy on the rupiah, he said. "People who before had been waiting to buy the dollar are now rushing into the market."
He said the market was looking to the government to show concrete signs of its taking action against the terrorist threat.
Halfhearted statements and actions, he said, would only prolong market anxiety.