It appears as though many investors are much more unsettled by the current global credit crunch and the US sub-prime market meltdown. Coupled with the uncertainty of the US dollar and a substantial number of investors who have recently sold their shares in stable and profitable companies, this could spell trouble.
The practice of profit-taking, where investors decide to accept a certain amount of profit by selling their shares while a stock is in an upward trend, can damage companies by dropping their share prices due to a large volume of shares being sold off.
In Indonesia, Telkom and Astra International, two big cap companies who recently experienced strong runs, were hit hard as their prices dropped sharply last Friday when as the market closed. It appears as though investors who were worried about the effects of the release of Indonesia’s February inflation report opted to reduce their positions before Monday.
Analysts Santkno Suherman of Batavia Prosperindo said that this market decline is nearly all due to profit-taking activities spurred on by gains over the past few days. These actions were also prompted by losses in other markets around the world including those on Wall Street which occurred overnight. Suherman added, "I don't see any negative news coming from the domestic front that may have driven the market down. I would say the weak external markets were taken by market players as an excuse to lock in profits."
Indonesian companies weren't the only ones hit hard by profit-taking recently; the Hong Kong market slid substantially as investors decided to cash in profits earned recently. Many of the shares were sold after news of nearly 1.33 billion Hong Kong dollars worth of ownership in two mainland Chinese companies was being sold. As was the reaction in Indonesia, investors in the Hong Kong market also took into consideration the decline which took place on Wall Street overnight.
