Holiday to stall index upward trend
The Jakarta Post, Jakarta
Trading on the Jakarta stock market is expected to be slow this week ahead of religious festivities, putting a brake on last week's rising trend.
"The trend will be reversed amid thin trading volumes. This is common every year when the long holidays draw near," Ferry Latuhihin, a stock and currency analyst with Danareksa Securities, told The Jakarta Post on Friday.
Investors would wait on the sidelines ahead of the long holidays, starting with the Idul Fitri Muslim festival. The Jakarta Stock Exchange will be closed starting Thursday and will resume trading on Dec. 11.
The index has been steadily on the rise over the past weeks thanks to good news from inside and outside the country, with the index closing at 390.42 points last Friday, or 2.4 percent higher than the previous week's close of 373.23.
Daily trading volume averaged 357.68 million shares valued at Rp 350.13 billion (US$38.9 million) last week, compared with 592.2 million shares valued at Rp 282.9 billion the previous week.
Domestically, the progress in the Bali bomb probe, coupled with relatively better macroeconomic fundamentals, as evidenced by manageable inflation and a stable rupiah, have so far managed to convince market players that the country is crawling back to its feet from the slump that followed the Bali massacre.
On the external front, the U.S. Federal Reserves' move to cut key interest rates to 41-year lows early in November buoyed up Wall Street. The Wall Street rally was followed by its regional peers as hopes of a U.S. economic recovery ran high.
"The index's recent upward trend must be attributed to those factors. The (U.S.) rates cut, which drove Wall Street to rally for seven consecutive weeks, along with our country's sound fundamentals and the Bali probe progress have all proved helpful for our index," Ferry said.
"So, although the market is expected to be slow in the near future thanks to the holidays and other factors, in the long run the index still has a good chance of climbing towards the 400 level."
Aside from the long holidays, another stock dealer said the market would be lackluster this week as players were still waiting for the latest news on the government's plan to privatize state-owned telecommunications firm Indosat.
The government has said it is committed to finalizing the sale of a 42 percent stake in the country's second largest telecommunications company by year-end.
As for the currency market, the rupiah will remain stable at around 9,000 per dollar due to supply and demand equilibrium, a currency dealer said.
"The rupiah will be moving in a relatively similar range to last week, that is, around 9,000, although there is still a chance for the currency to slightly strengthen," he said.
Ferry shared this view, saying that the local unit would not fluctuate wildly.
"There is no speculative trading these days. Trading is simply taking place on a real-demand basis. So, the rupiah is going to be stable this week," Ferry added.
Last week, the rupiah closed at 8,975 against the U.S. dollar, a little stronger than 8,995 the week before.