Thursday, October 9, 2008

Suspension of the JSX

Headlines of today's newspapers are dominated by the decision of the Jakarta Stock Exchange to suspend all transactions on Wednesday, 8 October at 11 am, after the Stock Index plummeted more than 10%. According to the President Director of JSX Erry Firmansyah, the suspension has been made because transaction has developed irrationally, although the value of transaction is not very big i.e. only below Rp 1 Trillion, but the Stock Index dropped very sharply. Actually the Stock Index has shown indication to drop since Monday 6 October, and it even droped to more than 10% on Tuesday 7 October at 15.29, but considering that it was almost closing time, no
suspension was made. He further said that the cause of the problem is the U.S economic crisis. Considering this fact, President SBY has instructed 14 State Owned Enterprises listed in JSX to buy back its shares from the public. Meanwhile, on Tuesday 7 October, the Central Bank has increased the interest rate to 0.25%, which is contrary to what has been done by other countries' Central Banks that have cut their interest rates.

In view of the above, I felt that the devastation caused by the panick selling of stocks could have been prevented or at least minimised if the suspension of JSX has been done on Monday or Tuesday when the Index has fallen rapidly. The late suspension has enabled spectulators to take advantage by selling huge quantity of stocks causing great panick among other traders. Now that the 'water is under the bridge' let us hope & pray that the government will carry out a better coordinated bail out plan for this problem.

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