Jakarta stock market hits new record high

Jakarta stock market hits new record high

The Jakarta Post, Jakarta

Driven by optimism of higher economic growth next year and
continuing macroeconomic stability, the Jakarta stock market
soared on Tuesday to another record high.

The Jakarta Composite Index closed 1.42 percent, or 12.642
points, higher at 901.380 on a trading volume of 873.35 million
shares worth Rp 1 trillion (about US$111 million).

The record high for the bourse will not only improve its
chances of becoming the best performing stock market in the
region, but will also increase confidence in the country in the
eyes of international rating agencies and investors.

Stock analyst Fendi Susiyanto of BNI Securities said investors
continued to be buoyed up by positive sentiment amid confidence
that the new government would be able to provide a more conducive
climate for business.

"The positive sentiment includes higher growth projections for
next year, more stable macroeconomic indicators, a better export
performance and improving corporate profitability during the
third quarter of this year," said Fendi.

Fendy explained that investors saw better prospects for listed
companies with there being huge scope for business growth
capitalizing on stronger domestic purchasing power.

The economy is expected to grow by 4.8 percent this year and
5.4 percent next year, up from 4.1 percent in 2003.

The higher growth prospects for Indonesia next year have been
confirmed by the World Bank, which has decided to revise up its
Indonesian growth projections for this year and next.

The World Bank said the country's gross domestic product would
expand by 4.9 percent this year, compared to an initial
projection of 4.5 percent. It also expected Southeast Asia's
largest economy to grow by 5.4 percent next year, up from an
initial forecast of 5.0 percent.

The government's plan to sell more of its minority stakes in a
number of banks has also contributed positively to market
sentiment this week.

The Ministry of Finance's Asset Management Company (PPA) has
confirmed that it will sell 20 percent of the government's stake
in Permata Bank and in a number of other listed banks in December
to help plug the state budget deficit.

The government sold 10 percent of its shares in Bank Danamon
for Rp 1.74 trillion on Thursday.

The stock market usually goes into rally mode ahead of the
government asset divestments, with some analysts suggesting that
the surge in the bourse had been helped by a number of state
pension funds and insurance companies, which had been ordered to
pump funds into the market and then took them back after the
sales had been completed.

"Given all the positive sentiment, including the good news
from the World Bank, there is a possibility that the Index will
test a new resistance level of 928," said Fendy, adding that
negative sentiment from the regional market and the upcoming long
holidays would likely limit the upside potential for the market.

Investors are likely to avoid active trading in the next
couple of days before the U.S. Federal Reserve meeting on
Wednesday, which is expected to raise the U.S. benchmark interest
rate by a quarter of a percentage point to 2 percent.

A need for cash over the long Idul Fitri holiday is also
expected to encourage profit-taking among investors.