Student demos cast a shadow over JSX
JAKARTA (JP): Fears of escalating student demonstrations and reports of looting will continue to cast a shadow on the country's financial market this week.
Securities analysts said on Friday that such fears would dampen positive sentiment arising from the latest letter of intent signed by the government and the International Monetary Funds.
They said that the agreement, which would allow Indonesia to receive another $1 billion tranche from the IMF, should have improved the market sentiment because with the additional fund, the central bank would have stronger reserves to stabilize the ailing rupiah.
"But at a time when the political situation is not so encouraging, such a positive factor will not have an impact on the market. Fears of unrest will remain the dominant factor," head of research of BNI Securities Adrian Lesmana told The Jakarta Post.
He said that trading activities in the ravaged local market were no longer based on the fundamental factors of the companies but rather on social and political situation at home.
"The ups and downs of stock prices in the local market are determined by political and social uncertainties," he said. A series of student demonstrations hit Jakarta and Surbaya last week demanding President B.J. Habibie resign for failing to halt skyrocketing prices.
Stockbrokers said that the absence of fresh leads, coupled with first-half devastating financial reports of most companies, would force most investors to shun Indonesia's market.
"I think most foreign fund managers no longer list Indonesia's market as an investment spot for foreign investors due to the political uncertainty here," said head of institutional sales of Mashill Jaya Securities Antonio Yongnata.
Associate director of state-owned securities house Bahana Securities, Andre Cita, agreed, saying that improving political and social instability at home has become a prerequisite for the government to attract foreign funds.
Gloomy
Though the local market remained gloomy in the short term and long term, BNI's Adrian said that certain stocks, especially resources and mining based ones were still worth picking as most of them generate their revenue in dollars.
"But avoid picking up retail stocks which are sensitive to riots," he said, pointing out that shops and buildings of Matahari, Ramayana and Hero were the main looting targets of angry mobs in the aftermath May riots, which brought down former president Soeharto.
But Mashill's Antonio did not agree with Adrian, saying that most investors in the local market are short-term oriented who base their trading heavily on market sentiment.
"There are no more long-term investors here," he said.
Currency dealers also shared stock analysts' view, saying that the local foreign exchange market would largely rely on the development of the political situation at home.
They said that the rupiah, which closed at 11,650 on Friday last week against 10,850 the previous week, was expected to trade between 11,800 and 12,000 levels this week.
"The direction of the rupiah has been directed by the political situation," Robert Z. Toruan, a dealer with Bank Niaga said on Friday.
He said that the rupiah might nosedive further to above the 12,000 level this week as demand by local companies and banks to settle their foreign obligations would increase later this month and fears of a possible social outbreak might occur again.
The JSX Composite Index fell 1.51 points to 324.04 last week from its close at 325.55 the previous week.
Daily average turnover, however, fell to 182.50 million shares changing hands last week compared 270.82 million shares the previous week.
The daily average transaction value, however, remained almost unchanged at Rp 248.15 billion last week compared to Rp 248.11 billion the previous week. (aly)