Jakarta stocks, local unit to continue appreciation trend this week: Analysts

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta composite stock index is expected to continue its rally this week on lingering positive corporate news, while the rupiah is also predicted to continue its appreciation trend, albeit at a slower pace, analysts say.

A stock analyst with a local bank said the stock index would try to test a higher resistance level of 520, after closing at 510.69 on Friday, up 15.91 points from the previous week's level of 494.78. But the daily average transaction value declined slightly to Rp 610 (US$74.8 million) from Rp 652 billion the week before.

The analyst said that dividend announcements by some companies had heartened investors, which in turn had lifted the stock index.

He said the announcement last week by the country's largest cigarette maker, PT Gudang Garam, and retail company PT Ramayana Lestari Sentosa to allocate a hefty dividend for the 2002 financial year was positive news.

Gudang Garam will pay a dividend of Rp 300 per share, while Ramayana Rp 100 per share.

"We expect the index can rise to its second resistance level this week on more positive news," the analyst said.

The analyst added that underlying market sentiment would remain positive for next week, thanks to the rupiah's 10 percent rise since January against the U.S. dollar and falling interest rates.

The central bank benchmark interest rate fell to 10.27 percent last Wednesday, with Bank Indonesia Governor Burhanuddin Abdullah saying there was still room for the rate to drop lower amid benign inflation.

There is an expectation in the market that the rate could fall to below 10 percent.

Bank Indonesia has been guiding down its interest rate lower for the past year. The rate was above 17 percent early last year.

As for the diplomatic row between Indonesia and Sweden over Sweden's refusal to act against several leaders of the Free Aceh Movement (GAM) living in the country, the analyst said the issue was of little consequence.

On the currency market, Bank NISP analyst Iwan Dharmawan said that given the current positive macroeconomic condition as reflected by the decline in the interest rate, the rupiah would test a stronger level of Rp 8,100 per dollar.

"The rupiah will further stabilize in the coming week, maintaining its recent trend," Iwan said.

Iwan, however, said that there would be some correction this week, particularly if the rupiah appreciated too rapidly.

He predicted the rupiah would stabilize in the range of between Rp 8,200 to Rp 8,100.

The rupiah closed last week's trading stronger at Rp 8,180 per dollar, compared to Rp 8,350 in the previous week.