Blue chip trading expected to boost Jakarta stock market

Blue chip trading expected to boost Jakarta stock market

Dadan Wijaksana, The Jakarta Post, Jakarta

Active trading on blue chips shares will push the Jakarta
Composite Index a bit higher this week to rebound further after
experiencing its first drop of the year two weeks ago.

Analysts predicted the increasing trend would continue
throughout the week, testing the resistance level of 450-455
points.

"There is going to be some actions of profit taking, but the
index will go higher with blue chips share leading the movement
to test the 455 level," stock analyst Hengky Sumarli said over
the weekend.

The index closed higher last week at 144.38 points, up from
436.98 the week before, thanks to active buying on leading
corporate shares in the closing days of the week.

Hengky attributed the index's sharp increase in last week to
the influx of foreign players, who spurred the index's upward
movement by taking part in shares' buying spree.

Last week's trading saw active buying in some of the blue
chips shares, most notably state-owned telecommunication giants
Telkom's and Indosat's, and also the country's largest automotive
company Astra's.

The three recorded a significant gains from the trading.

Aside from corporate actions, active movement in the region,
such as Thailand's and the Philippine's capital markets, has also
served as positive sentiment for Jakarta stock market.

That same factors, according to Hengky, would drive the index
up this week.

Zulfikar, analyst of Mandiri Sekuritas, also painted an
optimistic outlook for the index this week, saying the index has
reached a solid supporting level, that it was unlikely to go
down.

"There is strong possibility the index would rise, ending up
at the same level of index as last week's would be the worst it
can come up with," Zulfikar said.

Some corporate news, he went on, including government plans to
privatize Indosat, state-owned drug maker Indofarma and other
state-owned firms would remain positive to the market.

Meanwhile, in the currency market, the rupiah would likely to
remain stable with the tendency to strengthen looming large,
according to an analyst.

Currency analyst from PT Currency Management Group Farial
Anwar predicted the local currency during the week would be
traded in a familiar range of Rp 10,150-Rp 10,300 against the
dollar.

"The rupiah will be hovering steadily at familiar thin range
this week, but it would continue to gradually strengthen as it
was for the past weeks," Farial said.

The local currency ended slightly stronger last week at Rp
10,245 from Rp 10,260 in the previous week.

According to Farial, the gradual increase was caused by high
demand for the rupiah, overweighting demands for dollar from
corporations to repay their debts.

High demands for rupiah came as results of the recent floods,
the central bank's intervention combined with moves from state
banks and the Indonesian Bank Restructuring Agency (IBRA) to
convert its dollar to rupiah.

The floods, Farial said, have raised demands for rupiah as the
government needs to rehabilitate damaged infrastructures and
public services.

Insurance companies also needs a huge cash in their hands to
cover claims resulted from the floods. It has been reported that
the country's insurance companies are readied Rp 2.5-Rp 5
trillion in cash to settle all the claims.

The market would also apply a wait and see stance towards the
progress of the much-anticipated divestment of PT Bank Central
Asia, which is now entering its closing stages.

"Should the process run smoothly, it would give good signal
for the success of others divestment programs, including the
planned sale of Bank Niaga, thus giving confidence for foreign
investors in the country's banking sector."

The government is planning to sell the remaining of its 51
percent of stakes in BCA, the country's largest private banks.