Index expected to rebound this week

Index expected to rebound this week

Dadan Wijaksana, The Jakarta Post, Jakarta

As the overall market sentiment remains positive, the Jakarta
Composite Index is expected to return to its upward trend this
week, after the Telkom fiasco disrupted the trend last week, a
stock analyst said.

Adrian Rusmana, head of researcher at BNI Securities, said in
its weekly stock assessment that the index had the potential to
reach 520 points this week, rebounding from last week's trading
which saw the index decline to 510.48 points.

The index broke the 520 mark in mid-week -- thanks to the
overall positive sentiment in the market boosted by stronger
rupiah and continued cuts in Bank Indonesia's benchmark interest
rate -- but faltered later following Telkom's audit report
problems with a U.S.-based financial watchdog.

The company had its 2002 financial report rejected by the U.S.
Securities and Exchange Commission (SEC) -- leading to a
temporary suspension of the company's stock on the New York Stock
Exchange -- because the audit was conducted by a firm that is not
accredited by the SEC.

However, upon hearing the company's pledges that it would
comply with the ruling, the SEC allowed Telkom to resume trading
on Friday.

This, coupled with continued good sentiment, will likely push
the index higher.

"The correction should not be responded to with panic by
investors. This could be a positive indicator for the index to
take a breath before extending its rally, which began in March,"
Adrian said.

"It has the potential to reach 520 points."

The index closed last week at 510.48, with the daily average
value standing at Rp 588.5 billion (US$71.7 million).

Active buying will not only be limited to blue-chip shares but
will also affect second-liners, including banking stocks, which
have caught the attention of investors ahead of the government's
plans to offer a 15 percent stake in Bank Mandiri on the stock
market.

Meanwhile in the currency market, the rupiah is expected to
strengthen this week within a narrow range, rebounding from last
week's decline caused by profit-taking moves.

"Heavy profit-taking slowed down the rupiah's movement last
week. But since expectations for continued capital inflow remain
high, I think the rupiah will bounce back this week, maybe to a
level slightly below 8,200," a currency dealer from a local bank
said on Sunday.

The local unit ended last week's trading weaker at 8,225 per
dollar, compared to 8,180 the week before.

Amid the absence of fresh news that could shake the current
positive sentiment, investors would still expect more capital
inflow to buy local assets being offered under the privatization
and divestment programs. This would increase the chance for the
rupiah to strengthen, the dealer said.

Since early this year, the local unit has appreciated close to
10 percent against the faltering greenback, making it the best
currency performer in the region.