'Jakarta Index to follow global market euphoria'

The Jakarta Post Jakarta

The Jakarta stock market will continue this week to follow the global market trend, which has been on the rise since the Iraq war broke out days ago, although some serious issues at home would limit progress, stock analysts said.

"Markets across the globe will keep rising on the assumption that the ongoing Iraq war will be short-lived, which investors see as positive for global economic recovery.

"The interpretation will also be the same in Jakarta. However, while the (Composite) Index is expected to rise, I don't think it will rise as sharply as the global markets," Jasso Winarto of Sigma Research Institute said over the weekend.

Since the first missiles belonging to the U.S. and its allies were fired on Iraq on Thursday last week, investors have been experiencing a sort of "war euphoria", with the world's major stock markets soaring.

Jakarta was no exception. After declining in past weeks in the run-up to the war, the index has steadily climbed since the war began.

The Jakarta index closed last week at 394.04 points, up about 1.58 percent from the previous week. Daily volume averaged 207.14 million shares worth Rp 184.278 billion (US$20.53 million), as compared to 311.36 million shares worth Rp 208.59 billion posted the previous week.

"Traders all over the world seem certain that the war will last for between two and three weeks, which means that it will have little impact on the global economy and cause minimal damage in Iraq," Jasso added.

In Jakarta, however, traders would also need to take into account a possible backlash from radical groups against westerners, especially Americans, Britons and Australians, Jasso said.

"This would slow down the pace of the rise (in the index). But, I think the index will still be able to go above 400 points."

A stock dealer at a local brokerage echoed Jasso's view, saying that the local market was in a good position to keep climbing, following its peers throughout the world.

"This week, we will likely see a further rise in the Jakarta index. The world's indices will only be corrected if the market players see indications that Iraq could hold out for a longer- than-expected period," she said.

Meanwhile, in the currency market, the rupiah is expected to weather the pressure arising from the Iraq war this week to move at around similar level as it has in recent weeks.

"Pressure on the rupiah will be strong as the U.S. dollar will maintain its grip on regional currencies. But, I believe Bank Indonesia will not hesitate to mount a defense for the rupiah.

"So, the rupiah will still this week be hovering not far from the current level," a currency dealer said.

The local unit barely changed last week, despite the war. It closed the week at Rp 8,965 against the dollar, slightly weaker than Rp 8,915 the week before.