Today (27/01), Indonesia's benchmark stock index (the Jakarta Composite Index, abbreviated IHSG) fell 2.58 percent to 4,322.78 points. This sharp decline can only be explained by profit taking amid market uncertainty. As I have reported before, the IHSG is highly susceptible to profit taking when negative sentiments arise in the market. Factors that accounted for these sentiments were the continued depreciation of the rupiah exchange rate and falling Asian stock markets (that were impacted by Wall Street's negative ending last week).
The major victims of this profit taking at the Indonesia Stock Exchange (IDX) were the big cap stocks, such as Astra Agro Lestari, Unilever Indonesia, Indo Tambangraya Megah, and Indocement Tunggal Prakarsa. The pace of profit taking left a new gap at 4,358-4,437 but the decline also meant that a previous gap (4,393-4,398) was closed (and almost closing the gap at 4,270-4,292).
Asian stock markets were down as they were still plagued by China's weak HSBC Manufacturing PMI in combination with various companies' financial reports that did not meet investors' expectation. Negative sentiments were also caused by Japan's slowing exports, which results in the country's growing trade deficit. Moreover, ahead of the Federal Reserve's tapering issue, investors turn to safe havens, such as the US dollar and Japan's yen. On global markets concern has arisen about a quickening pace of the Federal Reserve's winding down of its quantitative easing program.