Mon, 05 May 2003

Jakarta stock market to see slight correction this week: Analyst

Dadan Wijaksana, The Jakarta Post, Jakarta

Profit-taking is expected to cast a shadow on the Jakarta stock market's performance this week, as investors seek to cash in their gains from last week's 3 percent surge in the stock index, an analyst has said.

"The decline will be limited, however, as the actual overall sentiment remains relatively positive. The index will likely stand at about 440 points this week," a stock analyst at Kim Eng Securities told The Jakarta Post on Sunday.

"The correction will be a technical one and has nothing to do with the current market sentiment," he added.

Last week saw the index rise by 12.776 points to 447.82, from the previous week's closing of 435.04 with daily volume averaging 715.4 million shares worth Rp 424.38 billion (US$48.97 million), compared with 747.36 million shares, worth Rp 371.258 billion, the week before.

The analyst said that the country's stable macroeconomic indicators, coupled with recent positive data on exports have encouraged market players.

Statistics Indonesia (BPS) announced last week that exports had increased by 15.8 percent in the first quarter of the year to $14.9 billion, in comparison to the same period in 2002.

The International Monetary Fund (IMF)'s remarks that Indonesia remained on track to meeting 4 percent economic growth this year despite adverse external conditions has also helped build investor confidence in the country's economy, he added.

"The only thing that has the potential to hurt market sentiment will come from the lingering tension in Aceh."

He was referring to the tension between the government and the Free Aceh Movement (GAM), which has been on the rise, over the status of the country's westernmost province.

On the corporate side, disappointing first-quarter profit results of some listed companies will not have a huge impact on the market, he said.

"Last week, even though the financial performance of some blue-chip companies were a disappointment, we will still see a rise in the overall index."

Bank Central Asia (BCA), Indofood and Gudang Garam all posted a sharp drop in their net profits.

Turning to the currency market, the rupiah will remain strong this week on the expectation of capital inflows to purchase local assets, a currency dealer said.

"The fact that the U.S. dollar has been weakening recently will also add power to the rupiah," a local dealer said.

The capital inflows are expected to come from investors vying for local assets currently on offer, such as Bank Danamon.

The Indonesian Bank Restructuring Agency (IBRA) is scheduled to announce on Monday the final bidders for the bank.

The local currency should also benefit from the weaker dollar, under pressure from a series of discouraging economic figures, including a decline in April's manufacturing activity and a rise in the unemployment rate.

"I guess the rupiah will maintain its strong position this week at about Rp 8,650 to Rp 8,750 to the dollar," he said.

The local currency strengthened last week to Rp 8,675 to the dollar compared to Rp 8,740 the week before.