Stocks tumble almost 5% to a six year low

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)