Jakarta stock market may turn bearish, analysts say
The Jakarta Post, Jakarta
A technical correction, coupled with the absence of market incentives, will likely continue to drag the Composite Index down this week, signaling the end of the index's earlier upward trend.
After closing lower last week at 436.98 points, compared to 454.28 points the week before, the Jakarta stock market is expected to remain bearish throughout the week, analysts predict.
Last week was the first time this year the index had ended lower than the previous week.
According to stock analyst Dandossi Matram, the decline in the index was inevitable given that the current 430s range was already regarded as overvalued.
"The overvaluation means the index has a very good chance of going down next week with the market remaining fragile and volatile," Dandossi told The Jakarta Post over the weekend.
The possibility of a drop was also foreshadowed by Zulfikar, analyst at Mandiri Sekuritas, who said the index was currently at a resistance level, waiting for a decline.
"In the short term, the index is heading for a decline to the 420 point mark," Zulfikar told the Post.
He also believed that the absence of pro-market policies would further pressurize the index.
Other negative sentiments for the market next week include fears of higher inflation due to floods, the high rate of Bank Indonesia one-month promissory notes and a possible downgrading of the country's risk rating.
In fact, both analysts said, it was just such concerns that had triggered last week's stumble in the first place.
Moody's Investors Services said that an Indonesian request for a rescheduling of its interest payments to the Paris Club of creditors could lead to a change in the country's credit rating.
The country currently has US$150 billion in public debts.
A downgrading of the rating from the current CCC to "selective default" status would further stifle the already dwindling levels of investor confidence in the country.
Stock dealer at Cipta Merdeka, Hengky Sumarli, however, offered a more upbeat assessment, claiming that with big foreign players remaining in the market, the index still had a good chance of rebounding.
"It (last week's closing) was primary caused by the rating issue and profit taking. But I still think the market will be positive and active because of the flow of funds from foreign players," Hengky said.
The bullish market would not only occur in Indonesia, he added, but also in neighboring countries such as Thailand and the Philippines.
"The bottom line is that the market will still have a good chance of rising as long as foreign investors are around."
Meanwhile, in the currency market, the rupiah is expected to trade in a familiar range of 10,200-10,300 against the dollar during the week.
The country's huge debts, the continued debates on problems inherited from the massive bank bailout and slow asset sales would continue to put the local unit under pressure, analysts said.
The rupiah closed stronger last week at Rp 10,260 against the dollar, up from Rp 10,456 the previous week.