Analysts expect downward correction in Jakarta market<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
After hitting record highs on five consecutive trading days,
\nthe Jakarta stock exchange is likely to head downward this week
\nafter the week-long Idul Fitri holiday, as share prices in the
\nmarket are already considered overbought.<\/p>\n
The Jakarta Composite Index ended at a new record of 934.03 on
\nNov. 12, up by about 4 percent from 893.63 on the previous week's
\nclosing.<\/p>\n
Stock analyst Adrian Rusmana of BNI Securities said the bourse
\nwas currently overheated with a weekly yield of 4.15 percent in
\nU.S. dollar terms, making it the world's fourth most lucrative
\nbourse.<\/p>\n
\"Technically, the index is already in 'extremely overbought'
\nterritory. This leaves the way open for the bourse to head for
\na correction,\" said Adrian in a note to investors on this week's
\noutlook for the Jakarta market.<\/p>\n
BNI Securities forecast that the Index will hover in a range
\nof between 930 and 863 this week.<\/p>\n
Adrian explained that, fundamentally speaking, shares in
\nJakarta were relatively expensive compared with other bourses in
\nSoutheast Asia, with the Jakarta Index's price earnings ratio
\n(PER) currently standing at 15.2 times, higher than those of
\nSingapore (13.9 times), Thailand (10.9) and Malaysia (15.0).<\/p>\n
The Index's higher PER was not come in tune with the sovereign
\nratings given by international rating agencies, which rank
\nIndonesia lower than Singapore, Malaysia and Thailand.<\/p>\n
The lower ranking means that investment conditions in
\nIndonesia, both as regards portfolio and direct investment, are
\npoorer than in those three countries.<\/p>\n
\"The surge in the Index over the last couple of weeks was
\nprimarily driven by the 'emotional' response of market players to
\nthe World Bank's decision to revise the country's economic growth
\nupwards,\" said Adrian.<\/p>\n
\"This, however, is too weak to prop up the Index as the World
\nBank also revised up growth forecasts for other countries in the
\nregion, and their stock markets turned out to be less affected by
\nthe reports,\" he said.<\/p>\n
The World Bank said the country's gross domestic product would
\ngrow by 4.9 percent this year, up from its initial projection of
\n4.5 percent. It also expected the Indonesian economy to grow by
\n5.4 percent next year, up from its initial forecast of 5.0
\npercent.<\/p>\n
Elsewhere, a stock analyst with Mandiri Securities said the
\nsurge in the Index was unlikely to continue this week unless
\nthere was intervention from the government ahead of its plan to
\nsell its minority stakes in a number of banks next month via the
\nstock market.<\/p>\n
\"The plan is expected to drive up sentiment for investors,
\nespecially as regards banking shares,\" said the analyst.<\/p>\n
The stock market usually goes into rally mode ahead of
\ngovernment asset divestments, with some analysts suggesting that
\nsuch rallies are partly driven by state pension funds and
\ninsurance companies being ordered to pump funds into the market
\nbefore withdrawing after the sales have been completed.<\/p>\n
The finance ministry's Asset Management Company (PPA) has
\nconfirmed that it will sell 20 percent of the government's stake
\nin Permata Bank in December to help plug the state budget
\ndeficit.<\/p>\n
The government is also planning other sales in the same month,
\nincluding possibly its minority stakes in Bank Internasional
\nIndonesia (20.78 percent), Bank Central Asia (5.04 percent), and
\nBank Niaga (21.51 percent). The government earlier this month
\nsold 10 percent of its shares in Bank Danamon for Rp 1.74
\ntrillion.<\/p>",
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