Analysts see political pressures easing on local stock market

JAKARTA (JP): Political pressure against the local stock market may ease next week as legislators go into recess, with trading likely to remain flat on few incentives, analysts said.

They foresaw no significant political development that could drive the stock market from its current low.

Ario Ardhikari, a security analyst at ABN Amro Asset Management, said here on Saturday that with the House of Representatives entering its recess period, the market would shift its attention from politics.

Investors, he said, expected legislators to ease pressure on President Abdurrahman Wahid. "It will be a temporary relief though," Ario said.

The House's recess period begins on Monday and ends on April 25.

Ario said while the months-long stand-off between the House and President Abdurrahman would cool down, the underlying pressure remained.

"It's like a river that looks calm from above. But through it runs a strong current," he explained.

Hopes of a reconciliation between the President and legislators waned, as Abdurrahman rejected on Thursday the House's first memorandum of censure issued against him.

Legislators censured the President over his alleged involvement in two financial scandals. So far he stands firm in claiming his innocence.

The few political moves left their mark in trading at the Jakarta Stock Exchange (JSX) last week, which was shortened by Monday's Islamic holiday.

But Ario said that a rebound, led by cigarette shares, had outstripped negative sentiments to bring the market a notch up.

The JSX composite index rose about 10 points, ending the week at 381.05 from its Tuesday opening of 371.47.

For next week, Ario said it was unlikely the JSX index would hit the 400 level, as lackluster trading would keep it flat.

An announcement awaited from an independent medical team examining President Abdurrahman's health would most likely fail to impress the market, he went on.

"I think everyone knows about Gus Dur's condition, we shouldn't be too surprised by their (medical team's) announcement," Ario said, referring to the President by his more popular name.

House Speaker Akbar Tandjung said last week he would meet a medical team today to hear its report on Gus Dur's health condition.

A physically unfit President would give legislators more ammunition to oust him from office.

Ario warned that the market could capitalize on this issue by using it to stimulate trading next week. "If there are no corporate or other economic issues, investors may use the one related to Gus Dur's health," he explained.

A dealer at a local security firm estimated that regional sentiments would play a larger role in driving the local market.

"I don't see anything significant is going to happen here," the dealer said.

According to him, a dip in the U.S stock markets has sent regional stock markets down, and kept the JSX from rebounding.

The dealer said the JSX might be up for another round of beating when regional market sentiments continue to work against it.

The dealer said that the prospects of telecommunications shares were also alluring.

Legislators recently approved the raising of telephone charges by about 45 percent over three years, to help fixed-line operators cope with rising costs.

According to the dealer, the move would significantly help shares of blue chip companies like state-owned PT Telkom Indonesia.

Meanwhile, a currency dealer at a foreign bank concurred with stock analysts' views on the abating political pressures on the market.

Last week's political bickering between legislators and Gus Dur knocked the rupiah down to end the week lower against the U.S dollar.

By Friday, the local unit closed at 10,415 against the greenback compared with the previous week's closing at 10,385.

With political pressures temporarily relieved, he said Bank Indonesia was unlikely to continue its intervention in the market.

"We may see the Indonesian Bank Restructuring Agency converting some of its dollar revenue in the market," he added.

He warned that a bullish dollar in the regional market would keep the rupiah flat.

For next week, the dealer estimated the rupiah to trade within the range of 10,300 to 10,500 to the dollar. (bkm)