Indosat share sale to color trading
The Jakarta Post, Jakarta
Last week's sale of an 8.1 percent stake in international cellular operator PT Indosat will color trading in the currency and stock markets throughout the week amid continued optimism over the government's reform program.
But familiar pressure in the form of high dollar demand from corporations would likely stall the upward movement of the local unit against the dollar, analysts said.
The market euphoria would continue to run high throughout the week, but the rupiah was unlikely to break the psychological barrier of Rp 9,000, they said.
The local currency rose to an eight-month high last week, closing at Rp 9,080 against the dollar compared to Rp 9,280 the week before.
Analysts attributed the good performance of the rupiah to the upward trend of its regional peers, coupled with optimism resulting from steps taken by the government to carry out its privatization program and the divestment of local banks.
Still, the rupiah is seen as being hard put to break through key resistance at Rp 9,000, and is expected to stay above that level due to lingering concerns over corporate debts.
The key support levels for this week are set at Rp 9,050 and Rp 9,125.
"The market will try to test the Rp 9,000 level, but I'm not optimistic they will be successful," Ferry Latuhihin, currency and stock analyst at Danareksa Securities, told The Jakarta Post over the weekend.
Marking its first sale of state assets this year, the government sold 8.1 percent of Indosat last week through a private placement at a price tag of Rp 12,000 per share to raise Rp 1 trillion as part of its privatization program.
The government has also set May 27 as the deadline for four shortlisted bidders to submit offers for a 51 percent stake in PT Bank Niaga.
Although the stake is worth only about US$10 million, the sale will boost investor confidence that the country is moving forward with its reform program.
Analyst Khalil Rowte pointed out that progress with the government's economic reform program would help keep the rupiah's movement on an upward trend.
The government's strong commitment to reform has been said to be the main reason behind the strengthening of the local currency over the past several months. Regaining their confidence in the country, investors have been raising their investments here, thus helping to pump up the rupiah.
Turning to the stock market, Ferry warned that market players might be shocked to learn that the price of Rp 12,000 for the sale of Indosat's shares by the government was Rp 600 lower than the closing price of the share last week.
That could lead to a massive sell-off of the shares, which would in turn drag down the Composite Index as well, Ferry said.
"However, the share price will eventually go back to the level it should be in line with the company's performance appraisal," he added.
"The index should hover this week within a range of between 520 and 540 points, taking into account the overall positive sentiment in the market."
The index closed the week 12.327 points, or 2.3 percent lower than the previous week's close of 531.578.
Daily volume averaged 793.76 million shares valued at Rp 507.8 billion (US$55.89 million) compared to the previous week's 956.375 million shares worth Rp 492.91 billion.
State telecommunications firm Telkom closed the week down Rp 225 at Rp 4,050 rupiah. Cigarette maker Sampoerna lost Rp 175 over the week to close at Rp 4,275 while rival Gudang Garam dropped Rp 450 over the week to Rp 11,100.