Mining shares expected to weather rupiah decline<\/p>\n
Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
Despite the ongoing controversy over a lack of legal certainty
\nin the country's mining sector, the shares of most local mining
\ncompanies are forecast to retain their luster in the second
\nsemester of this year, analysts said.<\/p>\n
Volatility in the rupiah and an expected surge in the price of
\nseveral mining commodities on the international market will
\nlikely keep up investor interest in mining shares amid otherwise
\nuninspiring trading on the stock market in the second half.<\/p>\n
\"The revenues of mining companies are mostly in U.S. dollars.
\nThe rupiah's problems will lower their operating costs and widen
\ntheir profit margins,\" said Mandiri Sekuritas' mining analyst
\nAchmad Solichin on Thursday.<\/p>\n
He also explained that most mining shares, especially those
\nowned by companies engaged in the production of metal-based
\ncommodities, such as state-owned PT Aneka Tambang and PT Timah,
\nand privately owned PT International Nickel Indonesian, would
\nlikely stand their ground.<\/p>\n
Achmad said that this was because the international prices of
\nseveral commodities, such as nickel, tin and copper, which were
\nthe core commodities produced by the three companies, were
\nimproving.<\/p>\n
The price of nickel on the London Metal Exchange stood at Rp
\nUS$8,835 per metric ton on Thursday, up from $7,210 in the first
\nweek of January; tin at $4,735 per metric ton, up from $4,260;
\nand copper at $1,695, up from $1,550.<\/p>\n
As for the shares of energy-based mining companies, Achmad
\nfeared that the bulls would remain at home as the price of oil
\nhad been declining since the end of the Iraq war in May. The
\ndecline in oil prices would reduce the profit margin of oil
\ncompanies.<\/p>\n
The price of international benchmark Brent crude stood at
\n$27.85 per barrel on Friday, down from nearly $40 before the Iraq
\nwar broke out.<\/p>\n
Regarding the impact of the unexpected exit of Anglo-American
\noil company BP PLC and Anglo-Australian mining group Rio Tinto
\nfrom the world's most profitable coal mine, run by PT Kaltim
\nPrima Coal, Achmad said that it would not significantly affect
\nthe performance of mining shares.<\/p>\n
\"As long as local mining companies put in good performances
\nand produce healthy profits, financial investors will not let go
\nof their shares,\" said Achmad.<\/p>\n
Meanwhile, Erwan Teguh from Danareksa Securities concurred
\nwith Achmad, saying that the withdrawal of BP and Rio Tinto would
\nnot cast a shadow over mining shares as investors could not see
\nany legal violations in the case.<\/p>\n
\"The case is specific and there have been no legal violations.
\nIt's just business,\" said Erwan.<\/p>\n
The pulling out of BP and Rio Tinto was reportedly due to the
\nfact that they could no longer tolerate the uncertainties of
\ndoing business in Indonesia, especially in the mining sector.<\/p>\n
Over the last five years the country's mining industry has
\nbeen left bewildered by a spate of new government policies,
\nopposition from environmentalists, and hostility from local
\ncommunities.<\/p>\n
Regarding the performance of mining shares in the second
\nsemester, Erwan said that they would still be promising because
\nof the possibility of higher net profits being earned by mining
\ncompanies.<\/p>\n
He explained that such higher profits would result mostly from
\ngreater efficiencies in their operations resulting from lower
\ninternational oil prices. Fuel usually accounts for up to 50
\npercent of operating expenses.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/mining-shares-expected-to-weather-rupiah-decline-1447893297",
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"sponsor": "Okusi Associates",
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