Wednesday, 16 February 2011
PROFIT-TAKING PUTS PRESSURE ON THE SHARE INDEX IN THE FIRST WEEK
Profit-taking action and massive selling action in the last two finally puts pressure on the Composite Share Index(IHSG).In the opening in the first week of this year, IHSG experienced correction by 1,9%( down by 1,9% percent ) and closed at level 3,631.453 on Friday, January 7,20011. During trade on that date, foreign investors sold shares of up to Rp.1.5 trillions after they recorded a net selling worth Rp.260, 613 billions. The massive selling action made IHSG to lose up to 23.81% and made IHSG to experience further correction after it lost 1.25% on Thursday.
Not only foreign investors, local investors also take selling action, and all sectors experienced selling pressure with a quite significant decline of prices, the blue chip or the second and third layer shares. Share trade today draws a quite large number of investors with value of trade reaching Rp.6, 656 trillions. PT Kapita Sekurindo, in its researching, after closing of trade in the week, stated that IHSG experienced pressure since Thursday which continued until Friday after a long rally in the past two week. Correction of share with large capitalization that have been overbought is the cause of fall of IHSG.
External factor in the form of correction of major part of the regional share market brings a negative sentiment on local share market on Friday. A majority of shares in the Asian share market lost points. This condition caused the regional share market to show the worst record in the past four years. The cause of the fall of the regional share regional this time is down of commodity prices. “Currently, shares in the Asian share market were no longer cheap. What is needed is positive data from the United States that could accelerate increase of share prices to a higher level. This will help balance concern over China policy tightening and Europe debt crisis”, said Jamie Courts, sales manager of BGC Partners in Singapore.
PT eTrading market flash wrote that correction of share prices in the Indonesia Stock Exchange and in the regional market was affected by decline of the Dow Jones Index in Wall Street, as a result of increase of values of some shares that become overweight. And, increase of commodity prices threatens rate of labor absorption.
PT Indosurya Securities in its research, said that near the end of the week, many investors were taking profit-taking position by using the available information, such as concern over increase of domestic inflation, down of commodity prices, appreciation of the USD currency, decline of Australia’s economic performance due to the effect of the flood, and uncertainty about economic recovery in the Eurozone.
Actually, such action has been evident since Wednesday (January 5, 2011 ) where selling and buying activities performed by foreign and domestic investors have to diminish, and the effect was felt on Thursday trade. Even though there was a fall, volume of share trade increased. Selling activities by foreign investors also rises if compared to one day before.
From the technical aspect, according to Indosurya’s research, IHSG already touched overbought area and would moves reverse. Investors will ignore positiveness of economic data and will be more focused on realizing shorterm gains. Strengthening of dollar against other world’s currencies is a factor that causes fall of IHSG. To IHSG, designation of interest rate by Bank Indonesia at level 6.5% on Wednesday (January 5 ) only gives a stimulant for temporary strengthening of IHSG, while trend of increase of oil price that has reached USD90 per barrel cause high fuel subsidies becomes a concern to Indonesia’s economy in a long term, according to research of Kapita Sekurindo.
“IHSG has reached an overbought area, correction is needed to provide an opportunity for IHSG to do further strengthening”, wrote Kapita Sekurindo. According to Purwoko Sartono, research analyst of PT Panin Sekuritas, fall of share indices, local and regional, is also due to concern over increase of interest rates in China and India.
“from domestically, investors were monitoring threat of high inflation following increase of food prices as well as plan of limitation of subsidized fuel in March “, he said.
Bank Indonesia is confident that core inflation this year will be below 5% and cumulative inflation will not exceed 6% Bank Indonesia’s Director of Economic Research and Monetary Policy, Perry Warijyo, stated that the confident was based on prediction of appreciation of Rupiah value during the year and the strategy so that increase of international prices of commodities would not affect prices domestically. Government’s plan to limit subsidized fuel and to increase production basic price (HPP) of rice and highest retail price (HET) of fertilizers, according to him, would not have a direct on core inflation.
Minister of Finance’s Response
With regard to fall of IHSG in the first week in 2011, Minister of Finance Agus Martowardojo, met journalists at his office.” Fall of IHSG is neither a big problem nor a capital outflow. Based on our opinion, fall of IHSG happens in the beginning of each year. The reason is that investors and analysts were studying the condition of the share market. There is nothing to worry about.”
He opposed the idea that the fall IHSG is a capital outflow.” There is not need to concern about. It is a normal thing that after year-end holiday, the houses open their activities and make a little bit adjustment”, he said.
Yet, however, the minister stated that he would monitor movement of the share market, particularly when a quite significant correction happens. ”if someone makes a strategy correction, we just monitor and stay alert, but in general everyting is okay.”