Experts expect stock market to weaken this week

The Jakarta Post Jakarta

The Jakarta Stock Exchange Composite Index jumped last week by six percent on the back of significant gains in blue chip shares, but profit taking will likely push the Index down slightly this week, according to analysts.

Stock analyst Jasso Winarto of the Sigma Research Institute warned over the weekend that the Index's sharp increase would only be temporary.

"For this week, after active trading, the Jakarta stock market will take a breathing space on profit taking, waiting for things to cool down," Jasso told The Jakarta Post.

The Jakarta Stock Exchange Composite Index gained six percent during the week to break the psychological level of 400 points, thanks to the active buying on blue chips shares by foreign players.

The Index closed on Friday at 411.775 points, as against 385.201 points the week before, the highest level since September last year.

The market also saw an impressive increase in the transaction volume with a total of 2.78 billion share deals recorded during the week, valued at Rp 3.02 trillion (about US$288 million).

In previous weeks, the average transaction value stood at Rp 1.5 trillion.

Foreign brokerages led the buying spree, pushing the index to a record high as investors begin to build up their portfolios for 2002 early in the year, Jasso said, adding that this active buying movement is known as the "January Effect."

The influx of foreign investors into the Jakarta stock market was also made possible partly due to concerns over further lowering of the bench-mark interest rate by the Federal Reserve.

However, Jasso believed that all the hype would die down this week as the absence of positive sentiments and the country's fragile macroeconomic situation would eventually push investors away from the market.

A dealer at Cipta Mardika Hengky Sumarli shared the same view with Jasso, saying that the market would be less active this week.

"Before Indonesia, they (foreign investors) had made an impact in other markets in the region such as Thailand and the Philippines. And now they had picked Indonesia as their next investment destination.

"They won't be around for much longer, so this week's market will see a slight decline in the Index," Hengky told the post.

He was quick to add, however, the that the Index would not go any lower than the supporting level of 400 points.

Meanwhile, the currency market is expected to remain stable throughout the week with the rupiah to be traded in a narrow range, once again isolating itself from active currency movements worldwide.

Feri Latuhihin, a currency analyst at Danareksa Research Institute, predicted the local currency would hover at relatively the same level as over the last two months, regardless of what happens in the region.

The deteriorating value of the Japanese yen against the American greenback has raised widespread fears that it might put pressure on other regional currencies.

However, Feri was convinced that at the moment, external developments would pose lesser threat to the local currency than internal ones.

The rupiah closed last Friday at Rp 10,430 against the U.S. dollar, slightly weaker than 10,420 the previous week.