Stocks tumble, rupiah at eight-month preelection low

Rendi A. Witular, The Jakarta Post, Jakarta

As the first day of the election campaign began on Thursday, shares on the Jakarta Stock Exchange (JSX) dropped and the rupiah plunged to its lowest level in eight months because of jitters over security during the campaign.

The Jakarta Composite Index dropped by 2.5 percent or 19.129 points to 741.198 from 760.327. Among the stocks traded, 130 were lower than their previous closing and only 10 were higher.

Most investors were selling blue chips, such as shares of cigarette giant PT Gudang Garam, state-owned telecommunications company PT Telkom and food and soap maker PT Unilever Indonesia.

Gudang Garam fell Rp 900 to Rp 13,150, Telkom Rp 200 to Rp 6,950 and Unilever Rp 100 to Rp 3,450.

Stock analyst Ferry Latuhihin of state-owned Danareksa Securities said there was no doubt the decline was mostly driven by fears over security during the election campaign.

"Negative sentiment over the election campaign has set the stock market on fire. However, overall macroeconomic conditions and corporate performance will remain strong, raising hope that the decline will be temporary," said Ferry.

He said the drop in the stock index could not be seen as panic selling by investors, because the total trading value was relatively low; Rp 737.2 billion (about US$86.7 billion).

"It would be considered panic selling if the value reached Rp 2 trillion," he said.

Jakarta and other cities throughout the archipelago were colorful and hectic on Thursday, as the 24 political parties contesting the April 5 legislative election hit the streets on the first day of the campaign, which will end on April 1.

Ferry said that although the first day of campaigning was peaceful, investors were expected to remain wary over the next couple of days, watching security developments.

He said the stock index would likely stay in the range of 750 for the next couple of days.

He said the decline on Thursday was also fueled in part by further drops in the regional and U.S. markets.

In the United States on Wednesday, the Dow Jones industrial average ended lower by 160.07 points, or 1.53 percent, at 10,296.89. The S&P 500 Index closed down by 16.69 points, or 1.46 percent, at 1,123.89, while the Nasdaq Composite Index ended down 31.01 points, or 1.55 percent, at 1,964.15.

The declines in the U.S. bourses were caused in part by a report from the Commerce Department that the U.S. trade deficit widened to a record $43.1 billion in January.

Bourses in Asia also tracked down on the decline on Wall Street. Japan's Nikkei ended down by 136.20 points to 11,297.04, Hong Kong's Hang Seng Index tumbled 190.14 points to 13,024.06, and Singapore's Straits Times Index shed 27.24 points to 1,847.78.

Elsewhere, the election campaign has also hurt the rupiah, which ended the day lower against the U.S. dollar by Rp 40 at Rp 8,620 from Rp 8,580 on Wednesday. This was its lowest close since Aug. 5 last year.

A dealer at a state-owned bank said the slide was mainly caused by fear of unrest during the campaign.

The dealer said that rupiah was expected to trade at about Rp 8,600 to Rp 8,700 for the next week.