Subdued trading in local stock market expected

JAKARTA (JP): Stock trading is likely to be subdued again this week, despite signs of recovery emerging before the markets closed last week.

Securities analysts said that signs of bullish trading were seen before the close of trade last week, with a number of big buyers entering to market to test the trading atmosphere.

"The phenomenon will not be repeated this week, with most likely to sit back to watch the market's reaction to their move," one analyst said.

Analysts said that big investors were waiting for the right moment to renter the market.

"Since there is no fresh news, foreign funds will not be tempted to stay here for long," Mashill Jaya Securities sales manager Antonio Yongnata said on Saturday.

"As a result, our stock market will remain stagnant," he said.

The battered local bourse became the star performer in the Asian region on Thursday after thin trading earlier in the week. The main price index rose 7.2 percent to 457.94 on the back of an inflow of fresh offshore funds following the government's announcement of the 1999/2000 draft state budget on Tuesday.

However, the buoyant mood did not last long, with stock prices sliding 4.03 percent to 439.49 on Friday after speculative investors cashed in profits made on the previous day.

"It is not good to see the market swinging from one extreme to the other. Things have become so speculative now," said Vonny Juwono, an institutional sales broker with Trimegah Securindolestari.

Stock brokers said profit taking could continue in the early part of this week, putting further pressure on the market.

"But the main price index will not go below the key 400 point level in the foreseeable future," one broker said.

Stock analysts and brokers said that with no end in sight to the political and economic uncertainty bedeviling the country, the local financial market would continue to depend heavily on the direction of other equities markets in the region.

"If regional markets rise, our market will possibly follow suit. And likewise, if other regional markets fall, our market will slide too," Vonny said.

Antonio said that offshore fund managers were reluctant to invest here because of severe political and economic uncertainty here.

He said that last week's trouble in Aceh and Karawang in West Java painted a grim picture of the situation here to investors considering a return to the country's beleaguered financial markets.

Analysts said that although riots now had little direct impact on the local financial markets, foreign fund managers were still greatly concerned over social and political developments here ahead of the general election in June and presidential and vice presidential elections in November.

"The possibility of political upheavals in the run up to next year's elections will cast a shadow over all trading in the financial markets here," BNI Securities head of research Adrian Rusmana said.

Riots broke out in Karawang, West Java, on Friday after angry mobs hurled stones at police stations and looted shops.

Despite the unrest, the Jakarta Stock Exchange (JSX) main price index rose 10.41 percent (41.46 points) to 439.49 last week compared to 398.03 the previous week.

Daily average turnover rose by over 100 percent to 314.43 million shares last week compared to 129.13 million shares in the previous week.

Financial analysts and dealers said that the outlook for the beleaguered rupiah would remain steady.

The rupiah closed at 7,950 on Friday compared to its close at 8,050 at the end of trading the previous week. Currency dealers said it was unlikely that the rupiah would move much in the coming week.

"The rupiah is expected to trade at around 8,000 prior to the Muslim Lebaran holiday," a chief dealer with a joint venture bank said. (aly)