Analysts see brief rally in JSX

Analysts see brief rally in JSX

The Jakarta Post, Jakarta

Monday's peaceful presidential elections will provide positive
sentiment for the Jakarta Stock Exchange (JSX), but that will
likely be temporary as market players realize that the true
battle lies ahead in the second-round election in September.

Stock analyst Dandossi Matram said on Monday that the recent
rally in the stock market could continue for weeks to come with
the market trying to take advantage of the "positive
psychological perception of the election."

"But it will not last long, as no majority winner is likely to
emerge (from the first round). So, the recent rally will, I
think, be short-lived," Dandossi said.

The elections rules stipulate that if no candidate gains a
majority of more than 50 percent of the vote in the first round,
a second round on Sept. 20 will be held for the top two winners,
which some have feared could create conflict between supporters.

Five pairs of presidential and vice presidential candidates
are currently vying to secure the country's leadership for the
next five years.

Last week, on expectations of a peaceful election, the Jakarta
stock composite index rose by more than 3 percent on the previous
week to close at 745.03 on an average daily volume of 1.26
billion shares, worth Rp 636.32 billion (US$67.8 million). The
rupiah strengthened by more than 2 percent as compared with the
week before. The rupiah closed at 9,150 per U.S. dollar on
Friday.

Supporting the sentiment also were the limited impact of the
recent U.S. interest rate hike of 0.25 percent and Bank
Indonesia's measures to reduce excessive liquidity in the banking
sector, including the raising of minimum reserve requirements for
banks.

The rallies in the local market and the rupiah last week were
in stark contrast to previous weeks, which saw the rupiah hurt by
expectations of an aggressive rate hike in the U.S. and political
concern at home ahead of the election.

With polling day on Monday passing off peacefully, hopes are
high that the surge will continue.

However, "until we know the real winner, the risks (of a fall)
will remain in the market. That's why I think the upward trend
will be temporary," Dandossi said.

He did not identify what stocks in particular might gain the
most from the next brief rally, saying that the rise would have
more to do with sentiment rather than specific corporate action.

A dealer at a foreign bank however, said that the stock index
would be pushed up by blue-chip shares, most of which had lost
some value from the market slump last month.

Citigroup economist Anton Gunawan also noted that the trouble-
free election was a good sign for the market.

"The peaceful July 5 election will definitely improve market
sentiment as it will reduce uncertainty, but there's still a long
way to go before the second round, and anything could happen
along the way.

"So, despite positive market sentiment, I think the risk will
remain," Anton said.