Analysts expect Jakarta composite index to continue rally

Analysts expect Jakarta composite index to continue rally

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index is forecast to continue its rally
this week on the government's plan to raise telephone rates, and
positive signs from cigarette sales this year, while the rupiah
is expected to fall, analysts said.

"We shall see several positive sentiments this week, produced
by telecommunications and tobacco shares. I predict that the
index will be traded between 525 and 535," said a broker with a
local security firm.

The index ended slightly higher last week at 525.500, up just
0.812 points on the previous week. Daily volumes averaged 1.08
billion shares worth Rp 630.42 billion (US$76.1 million),
compared with 725.32 million shares worth Rp 382.51 billion the
previous week.

The broker said that investors would keep their gaze fixed on
telecommunications shares such as those of PT Indosat and state
PT Telekomunikasi Indonesia (Telkom).

The government hinted last week that it would implement the
delayed telephone rates hike soon, following the establishment of
the country's first telecommunications regulatory body.

Earlier this year, the government raised telephone rates by up
to 35 percent; however, following protests from the public the
House of Representatives annulled the decision, citing the
government's failure to meet its promise of establishing the body
prior to the hike.

However, the broker said, negative sentiments would still
cloud the index because of uncertainties over sanctions the U.S
Securities and Exchange Commission might impose on Telkom after
the company missed a deadline last week to file its reaudited
2002 financial report to the watchdog.

"The uncertainties will prevent the index from climbing
further," said the broker.

Nevertheless, he said, negative sentiment could be balanced by
investor enthusiasm over the shares of tobacco companies PT
Gudang Garam and PT HM Sampoerna, following the bright first-half
sales performance of the latter.

Sampoerna, Indonesia's second-largest cigarette company,
announced last week that its first semester net sales rose 5.2
percent to Rp 3.471 trillion, from Rp 3.298 trillion a year
earlier, due to the increase in retail prices.

Meanwhile, in the currency market, Bank Mandiri analyst Panji
Irawan said that the rupiah was expected to lose more ground
against the U.S. dollar on security worries ahead of the annual
session of the People's Consultative Assembly on Aug.1 through
Aug. 10.

"The underlying sentiment globally and at home is negative.
Investors are liable to hold on to their dollars for fear of
political unrest during the annual session and possible terrorist
issues," said Panji, adding that the rupiah was expected to be
traded around Rp 8,300 to Rp 8,380.

The rupiah fell to Rp 8,320 against the U.S. dollar last week,
its lowest since early June as investors cashed in on gains from
the recent rise in the currency.

Panji said if the weakening trend continued and the rupiah
fell below Rp 8,380, there would then be a possibility of the
currency falling further to Rp 8,500.