Analysts say stocks will rally during elections<\/p>\n
Tony Hotland, The Jakarta Post, Jakarta<\/p>\n
Stock analysts predict the current rally in the local stock
\nmarket to continue during the upcoming general elections given
\nthe low interest rate environment and the fact that the stock
\nindex moved higher during the previous two elections.<\/p>\n
Speaking at a seminar on the stock market on Tuesday, analyst
\nDandossi Matram said that the Jakarta Stock Composite Index could
\ngo beyond the 800 point level.<\/p>\n
\"It's quite hard to predict the index ... but it could
\nprobably go beyond 800 points,\" he said.<\/p>\n
The local stock market has been in a rally mode over the past
\nseveral months, with the composite index soaring to all-time
\nhighs in January.<\/p>\n
Meanwhile, on Tuesday the index closed slightly lower, by 0.48
\npoints, at 767.26 amid profit-taking by investors.<\/p>\n
The current declining trend in domestic interest rates will
\npush investors to seek alternative investments such as the stock
\nmarket, as real interest rates received by bank depositors is
\nalready negative, if inflation and tax on time deposits are taken
\ninto account.<\/p>\n
Dandossi also said that the general election does not
\nnecessarily mean a depressing period for the stock market despite
\nthe usually heightened political tension.<\/p>\n
He pointed at the stock market rally during the previous two
\nelections to illustrate his theory. During the presidential
\nelection in 1997, the stock index moved higher and reached a new
\nhigh of 689.498 points. Meanwhile, during the 1999 election
\nperiod, the index was also in a rally mode and closed higher at
\n686.947 when a new president was elected.<\/p>\n
Greater volatility, said Dandossi, could possibly occur in the
\nindex during the campaign periods, but should end up at a higher
\npoint after each step in the election process was completed.<\/p>\n
Indonesia will hold a legislative election on April 5,
\nfollowed by a presidential election on July 5. A likely
\npresidential run-off will be on Sept. 20. It will be the
\ncountry's first direct presidential election.<\/p>\n
Analyst Budi Ruseno said that the possibility of invisible
\nintervention from political parties was also an element to be
\nconsidered, although this would be difficult to trace.<\/p>\n
Such intervention could be used as a sort of tool for any
\nparty that was confident of winning the election because a good
\nperformance by the bourse would give the impression of acceptance
\nin the new government by both the domestic and international
\nmarkets.<\/p>\n
\"We can't prove it, but we can sense it. For example, after
\nHabibie was elected as president, the economic condition was a
\nlittle better and investment existed. As we know, Habibie had
\nmany colleagues who had a heck of a lot of money to throw around,
\nand it was similar case with Megawati,\" Budi said.<\/p>\n
However, the analysts acknowledged that the rallying would
\ncontinue assuming that the general election process runs
\nsmoothly.<\/p>\n
\"If the elections don't go well, the increase will probably be
\nsmaller. In 1999, when the situation was super chaotic, the index
\nshowed increases. Now, things are steadier and improved,\" said
\nDandossi.<\/p>\n
Meanwhile, analysts Poltak Hotradero said that although the
\ncountry's macroeconomic condition was improving, as evidenced by
\nthe lower interest rate environment, it was primarily due to
\nexternal factors.<\/p>\n
\"The low interest rate is basically due to the low U.S.
\nfederal funds rate. The good news is that the United States won't
\nlikely increase the rate until early 2005 given their current
\nenormous budget deficit,\" he said during the same seminar.<\/p>\n
He said that the rally in the stock market does not
\nnecessarily mean an overall improvement in the real sector of the
\neconomy as investments by the corporate sector remain low due to
\nvarious problems and uncertainties.<\/p>",
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