Indonesia stock index tumbles 10 percent

Written by Chang on Friday, October 10th, 2008

Irwan Firdaus , The Associated Press , Jakarta | Headlines

Trading was suspended indefinitelyWednesday on the Jakarta Stock Exchange after shares plunged morethan 10 percent on fears about the global financial crisis.

The benchmark JSX index tumbled 168.1 points, or 10.4 percent to1,451.67 points before the trading halt was ordered just beforemidday.

“We are not protecting the index, but the investors,” boursePresident Erry Firmansyah told reporters. “The suspension will takethe whole day. We want investors to calm down before they makedecisions.”

Meetings were underway with financial institutions to determinewhen activity could be resumed, possibly Thursday morning, he said.

Firmansyah blamed the sell-off on turmoil in the U.S. financialmarket and said economic fundamentals remained strong in Indonesia.

The decline was driven by huge losses in commodities stocks. Theindex has fallen more than 20 percent in three days, and is off 47 percent since the start of the year.

Investors seemed to be dismissing comments by the central bankgovernor Tuesday that Indonesia will avoid the worst of the globalcredit crisis.

On Tuesday, Bank Indonesia raised interest rates a quarterpercentage point, citing a two-year high in inflation - in contrastto Australia, where the central bank cut its rate by 1 percentagepoint.

Traders said the market had expected the rate increase andattributed the sharp fall to selling by major foreign investors.

“What is happening is panic selling to an extent that it isirrational,” said Irvin Patmadiwiria, the head of investments at PTLautan Dana Investment Management.

He said roughly 70 percent of stocks traded in Jakarta are ownedby foreign investors, who are cashing out holdings to createliquidity.

Among the most active sellers were Merrill Lynch, United OverseasBank, McGuire and JP Morgan, he said. They were dumping blue chiptelecommunication, banking, and manufacturing shares.