Stocks tumble almost 5% to a six year low
JAKARTA (JP): Share prices on the Jakarta Stock Exchange plunged further yesterday with the main price gauge falling to a six-year low.
But the rupiah remained stable at the 11,000 level despite the share price plunge.
Securities analysts attributed the continued drop in share prices on strong rumors that the government would impose a foreign exchange control.
Fears of the imposition of a capital control remained strong despite a government denial, one analyst said, adding that a central bank circular issued to banks about withholding tax on gains from interest on Bank Indonesia promissory notes in the morning added to fears of a forex curb.
Bank Indonesia stressed Friday that foreigners could still buy its notes, provided they pay a tax.
Offshore investors can only benefit from the exemption if they enclose a statement from the taxation department of their own country, stating that they are a legal entity incorporated in a country that has a tax-exemption treaty with Indonesia, the central bank said.
"Market fear of a capital control has not diminished ... so most investors are trying to cash in stocks they hold here," Andre Cita, associate director of state-owned securities firm Bahana Securities, said.
Fear of a global recession and the worsening of the corporate financial performance also remains a major problem in stock trading.
Andre said that most investors suspected that emerging markets were on edge of collapse, thereby forcing them to shun the market immediately to cut losses.
"It is just like a roller coaster, most investors are dumping all the stocks they have," an institutional dealer with Trimegah Securindo Lestari said.
She said that most foreign brokerage firms operating in the local market such as Jardine Fleming, ING Barings, ABN Amro and Vickers Ballas Tamara were on the selling side for the whole trading day.
The JSX Composite Index fell 4.84 percent or 13.80 points to a six-year low of 271.67 on Friday with a total turnover of 167.91 million shares worth Rp 177.45 billion (US$16.18 million).
Losers led gainers 71 to 15 with 91 stock remaining unchanged.
The main price index in the local exchange has lost by almost 33.74 percent compared to 410.01 at the beginning of the trading this year and by 63.32 percent compared to 740.83 on July 8 last year when the crisis began to hit the country.
The head of research at BNI securities, Adrian Lesmana, said on Friday that almost all factors were discouraging for stock trading.
He said that with political uncertainty at home, combined with a shrinking economy and the high interest rate policy adopted by the government, investors had no reason to stay in the market.
"With interest rates at over 60 percent in time deposits, investors prefer to put their funds in the banking system for a higher yield," he said, adding that portfolio investment in money market instruments were much safer than in the equity market now.
Trading activities were marred by the suspension of PT Hanson Industri Utama and PT Wahana Jaya Perkasa after the former's stock price experienced a significant increase and the latter's experienced a drastic fall.
Unlike the stock market, the rupiah remained stable against the U.S. dollar in thin trading on Friday at a lack of fresh leads ahead of the weekend.
"But there are almost no transactions," said a dealer with Bank Niaga, Robert Z Toruan, pointing that offshore investors usually took profits ahead of the weekend to square their positions.
The rupiah, which opened at 11,200, fell to 11,300 at midday before ending Friday's trading at 11,200 to the American dollar in the Jakarta spot market on Friday.
Dealers said that market fears of possible social and political instability at home had prevented offshore operators from entering the market.
"Who will build new positions when there is no fresh news to justify new positions?" Niaga's Robert said.
Dealers, however, said the rupiah was expected to trade within a tight range next week as the market was still affected by escalating student demonstrations. (aly)