Index closes 2nd best in region

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index surged 63 percent higher this year, as it wrapped up its year-long impressive performance by breaking through the level of 700 on the last day of trading on Tuesday -- the highest level in just under four years.

The Index also ended the year higher at 691.895 on Tuesday from 424.945 at the start of the year, making it the second-best performer in Southeast Asia, after Thailand's stock exchange in terms of earnings in U.S. dollars.

The Index, however, failed to post another record-high on Tuesday's trading as it ended lower by 0.2 percent, or 1.138 points from 693.033 on Monday, although for most of the session it was traded higher and managed to pass the psychological level of 700.960.

Analysts said late profit-taking in several bluechips had driven the Index down, but the closing remained the highest since Jan. 18, 2000.

President of the Jakarta Stock Exchange Erry Firmansyah said that the sharp decline in the central bank's benchmark interest rate and steady improvement in key areas of the domestic economy had contributed to the increase in stock trading.

"The low interest rate has made the stock market more attractive for portfolio investment, especially for those seeking quicker and higher returns," said Erry on the sidelines of a press conference on the year's stock market performance on Tuesday.

He also said that the surge in the Index, coupled with the listing of three giant state-owned enterprises, had contributed to the jump in market capitalization, which had increased by 72.35 percent to Rp 463 trillion (US$54.4 billion), from Rp 268 trillion at the start of the year.

This year's improved Index performance was also reflected in its average daily transaction value, which reached Rp 516.7 billion, higher than last year's average of Rp 429.2 billion.

For the full year, funds raised from companies' initial public offerings had also increased to Rp 6.22 trillion from Rp 1.12 trillion last year, with only six new companies listed on the stock exchange this year, from 22 last year.

The Index has also shown itself to be resilient this year, even to terrorist attacks. The bombing of the JW Marriott Hotel in the Mega Kuningan business district, South Jakarta, only caused a temporary slide in the Index.

As for next year, Erry said that there was still room for the Index to climber further above 700, because its price earning ratio (PER) was still low compared with those bourses in Malaysia, Singapore and Thailand.

A stock analyst with BNI Securities, Adrian Rusmana, said that despite its limited direct impact on the country's overall economy, the rally of the Index should be a measure to gauge investor confidence in the country's economy.

However, he explained that it remained to be seen whether the positive performance of the Index indicated the return of foreign investors' confidence in the country.

Adrian said that the surge in the Index this year was mainly caused by the rally trend on key global stock markets in response to lower indicative interest rates around the world.

"The jump in the Index this year was caused mainly by global sentiment. It cannot fully reflect the country's economic performance," he said.

The stock market will be closed on Wednesday and Thursday for the New Year's holiday, and will be back in business on Jan. 2 with President Megawati Soekarnoputri scheduled to mark the first trading for the year.