Stocks head for rebound after selling pressure

JAKARTA. Indonesian stocks are expected to rebound today as pressure from renewed fears over the eurozone debt crisis are likely to ease, giving more traction to already positive domestic sentiment, analysts say.

The benchmark Jakarta Composite Index (JCI) dropped 1.6 percent to the lowest level in more than two months at 3,980.5 — below the 4,000 psychological barrier — on Wednesday before the Ascension Day of Jesus Christ
public holiday.

The rupiah also weakened 0.5 percent to Rp 9,343 to the US dollar after foreigners were seen dumping risky assets in the region and elsewhere in the world. International funds dumped a net Rp 718.6 billion (US$77.6 million) worth of Indonesian stocks on Wednesday.

“There will be a technical rebound [on Indonesian stocks] because the domestic factor has been very strong,” said MNC Securities head of research Edwin Sebayang, citing the “cheaper” price-to-earnings ratio (PER) of local stocks.

“That will attract investors,” Edwin added. Indonesian stocks’ average PER was at 12.9 times as of Wednesday, stock exchange data shows.

In the medium term, however, external factors will remain the key driver behind the local stock market, analysts say.

Fitch Ratings cut Greece’s credit rating on concerns the country will leave the euro. Greece will hold an election on June 17 after political leaders remained split over the austerity measures needed to secure a European Union-led bailout. The Greek government has failed to form a coalition in the wake of the May 6 poll. Elsewhere in Europe, Moody’s Investors Service downgraded 16 Spanish banks and 26 Italian lenders last week.

“The downside remains due to the eurozone [debt crisis]. A leadership crisis in Greece raises concerns that Greece will exit the eurozone,” said Universal Broker Indonesia analyst Alwi Assegaf. “The regional market also tumbled.”

Japan’s Nikkei lost almost 3 percent on Friday, while Korea’s Kospi tumbled more than 3 percent. Singapore’s Strait Times fell 1.54 percent, Kuala Lumpur’s composite index dropped 0.76 percent, while the Stock Exchange of Thailand (SET) saw a 1.63 percent dip.

The Indonesia Stock Exchange (IDX) was closed on Thursday and Friday and will be open for trading again on Monday.

The bourse has seen foreign net selling of Rp 2.6 trillion so far this month, with the benchmark stock index losing 4.3 percent. The rupiah has lost 1.7 percent since the beginning of this month.

Asian currencies were also headed for the biggest weekly drop since November, with the Bloomberg-JPMorgan Asia Dollar Index falling 0.9 percent this week.

The MSCI Asia Pacific Index of stocks erased all of its 2012 gains this week as more than US$2 trillion of global stock market value was erased, Bloomberg reported.

Aside from the eurozone debt crisis, other negative global sentiments clouded over stock markets worldwide, including US reports showing an unexpected contraction in manufacturing and consumer confidence and home prices in China that fell in a record 46 of 70 cities in April from a year earlier.

“But there will be stock hunting action at the beginning of the week, which could lift the JCI,” Alwi of Universal Broker Indonesia said. (Esther Samboh and Raras Cahyafitri/The Jakarta Post)