Indonesian share prices closed 2.7 percent lower on Monday in line with regional markets, on concerns that rising US inflation could make it difficult for more rate cuts there, dealers said. They said as chances of further Fed rate cuts fade, fears that the US could be heading into a recession have resurfaced. US inflation rose to a two-year high of 0.8 percent in November.
The Jakarta composite index closed down 75.14 points at 2,664.92 on volume of 3.12 billion shares worth 5.49 trillion rupiah (593 million dollars). Decliners led advancers 185 to 19, while 39 stocks were unchanged. The rupiah was trading at 9,395/9,400 to the dollar, down 0.8 percent from 9,325/9,330 late Friday. The index has lost 146 points or 5.2 percent from its all-time high of 2,810.96 set last Tuesday.
Investors also sold down shares ahead of a long holiday. The stock market will be closed for public holidays on Thursday and Friday this week and on Monday and Tuesday next week.
While Indonesia's economy is less dependent on US demand relative to other countries in the region, sentiment-wise "it will be very difficult to talk about what stocks would be worth buying here if the US is in recession," said Rafdi Prima, a technical analyst at Mandiri Securities. Prima said he did anticipate that the market would fall today but did not expect the main index to drop below 2,700 points.
"Apparently the market was hit by panic selling," he said. Some redemption of mutual funds ahead of the long holiday is partly to blame for Monday's fall, said Indo Premier analyst Ferry Khusaeri.
It is still difficult to predict whether or not the market has hit bottom and therefore the prospect for any rebound will depend on how Wall Street performs tonight, he said.
Among major decliners, index heavyweight Telkom lost 350 to 10,050, Astra International fell 900 to 26,550, Bank Rakyat Indonesia dropped 250 to 7,550 and coal giant Bumi Resources shed 150 to 5,750. Crude palm oil producer Astra Agro lost 1,200 to 24,350, nickel miner Antam fell 275 to 4,175 and rival Inco dropped 1,300 to 93,700.