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.