Stocks steal limelight as rupiah, commodities stay bearish
Stocks steal limelight as rupiah, commodities stay bearish
By Berni K. Moestafa
JAKARTA (JP): Surprisingly, the stock market performed
strongly last week, while the rupiah remained in the Rp 9,500 to
Rp 9,600 range, despite the country's volatile political events.
Activity at the newly established Jakarta Futures Exchange
also remained dormant with transaction volume far lower than the
initial target of 300 lots of robusta coffee and olein expected
to be traded daily.
Analysts gave mixed reviews on last week's five percent surge
of the Jakarta Stock Exchange (JSX) Composite Index amid
political tension and a U.S. Federal Reserve interest rate cut.
The JSX composite index managed to gain about 8 percent during
the week thanks to a five percent surge on Friday. The index
closed at 451.98 on Friday, up from 413.03 on Monday, breaking
the 450 point-barrier for the first time since early September
last year.
Equity analyst Martin Panggabean said that the JSX's five
percent jump on Friday was mainly driven by speculation.
"The increase did not justify domestic and regional
sentiments," Martin told The Jakarta Post on Saturday.
The market's attention last week focussed on the House of
Representative's plenary session which considered an
investigation into two financial scandals involving President
Abdurrahman Wahid.
The investigation, led by a House special committee, found the
President -- more commonly referred to by his nickname Gus Dur --
guilty of involvement in the two scandals dubbed as Buloggate and
the Bruneigate.
As a consequence, the House censured Gus Dur over his alleged
involvement, which many saw as what may be the first step toward
impeachment proceedings.
So far the President has denied any wrongdoing.
Some analysts suggest that foreign funds are behind the JSX's
surge, but Martin suspects local buying to have boosted the
market.
Even though most buying had come from foreign securities, he
said, it did not mean the entrance of foreign investors.
"Foreign investors have long deserted our stock market," he
said.
Martin said that rumors were circulating the market about a
local consortium holding Rp 1 trillion (some US$105 million) in
spending power.
Other rumors suggested that Gus Dur's political opponents had
seized the opportunity to uplift the JSX index to feign market
support for impeachment of the President.
But Martin dismissed that scenario as too unlikely.
On the regional front, he went on, most markets remained
stagnant, with a minor push from the U.S Federal Reserve interest
rate cuts on Wednesday.
The Federal Reserve cut interest rates by 50 basis points due
to signs of the U.S economy sliding into a recession.
According to him, the ensuing lift in regional market
sentiment should not have been able to boost the JSX index by
that much.
"Next week we'll be seeing a hefty correction of the market,"
Martin continued. He recommended buying on all shares.
Jasso Winarto, director of PT Sigma Research described JSX's
stellar performance last week as expressing a market frustrated
with Gus Dur's leadership.
"The market has become impatient with Gus Dur's inconsistent
statements, and his inability to uplift the economy," Jasso said.
He said the Federal Reserve's interest cut had lifted regional
market indexes by only about one percent.
"This leaves us attributing the (JSX) index's boost to
political developments here," he explained.
Jasso added that last week's peaceful demonstrations in
support of and against Gus Dur upped market sentiment, as feared
clashes failed to materialize.
However, he acknowledged that the market's reaction over Gus
Dur's possibility of impeachment was a bit surprising.
"The market was too enthusiastic, their reaction was too
naive," he said.
Jasso also dismissed rumors about Gus Dur's opponents being
behind the move.
"Friday's transactions totaled Rp 1.4 trillion, while it was
previously averaging Rp 200 billion. I doubt one group would have
spent that much money (for market manipulation)," he said.
Unlike Martin, Jasso recommended selling shares that gained in
last week's rally.
Meanwhile, a dealer at a foreign bank said that political
issues were not the main influence behind the rupiah's movement
last week.
"While the stock market concentrated on mass demonstrations,
banks here were busy digesting the Bank Indonesia (BI) foreign
exchange ruling," the dealer said.
The dealer was referring to a BI circular, detailing the
central bank's new foreign exchange ruling which limits offshore
rupiah trading.
She said that, based on the circular, BI had given onshore
banks until Wednesday, Feb. 7 to comply with its new ruling.
Because of the deadline offshore banks had to settle their
rupiah forward transactions before their due dates, she said,
adding that this had caused offshore banks to unwind their rupiah
position and purchase dollars.
A strong purchase of the dollar on Friday, she said, caused
the rupiah to breach the 9,600 level before state banks could
buck the trend and close the currency at 9,530.
The rupiah opened trading on Monday last week at 9,440.
The commodities market remained as dormant as in previous
weeks, according to one futures securities firm.
Danagraha Futures, a broker at the commodities futures
exchange said that olein closed the week at its highest price of
Rp 2,400 a kilogram (kg) for its June contract, while robusta
coffee hit Rp 4,950 per kg for a December delivery contract.
The firm predicts the olein spot price to fall to Rp 2,250 a
kg due to a lack of domestic buying power.
"(But) speculative interest from refineries, factories and
plantations seems to be the most important factor contributing to
the sharp decline in the Olein spot price," the firm added.
Danagraha recommended a buying position for the February and
March Olein contracts.
As for robusta coffee, the firm suggested a wait and see
stance due to insignificant price movements.
The Jakarta Futures Exchange began trading last December, but
the market has so far only received a lukewarm response from
investors.