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.