Jakarta stocks tip 1,000 before falling back

Jakarta stocks tip 1,000 before falling back

Rendi A. Witular, The Jakarta Post/Jakarta

Driven by optimism of higher corporate earnings and a flow of
fresh capital from the bond market, the Jakarta stock market
soared on Thursday to another record high, tipping the 1,000
level before inching down on profit taking.

The Jakarta Composite Index ended higher by 11.499 points at
997.698, off an intraday high of 1,003.503 with a trading volume
of 4.50 billion shares worth Rp 2.84 trillion (US$315 million).

Stock analyst Arwani Pranadjaja of Mandiri Securities said
improvement in the investment ratings of several bluechip
companies along with a report that the government might lower
corporate tax had fueled optimism on the trading floor for better
corporate earnings next year.

"There are a lot of positive sentiments coming out for the
corporate sector. The sentiments have outweighed technical fears
that share prices in the market are already overbought," said
Arwani.

Standard & Poor's (S&P) has raised local currency ratings for
a number of publicly listed companies, such as state-owned
telecommunication company PT Telkom and its rival PT Indosat. S&P
raised the ratings for Telkom and Indosat by two notches to BB,
two levels below the investment grade.

After the announcement, Telkom shares ended higher by Rp 100
to Rp 5,200 and Indosat unchanged at Rp 5,700.

Movement in Telkom caused a great swing in the market, given
the fact that it is the largest counter on the bourse with about
15 percent of the market's capitalization.

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.

Although it is not a new issue for local investors, a
statement by coordinating minister for the economy Aburizal
Bakrie to foreign-based media in Laos that the government will
lower corporate tax next year from 30 percent to 25 percent to
boost investment has fueled positive sentiment for foreign
investors.

Foreign investors, who account for more than 50 percent of the
flow of funds into the bourse, project better prospects for
listed companies in anticipation of a stronger domestic
purchasing power next year.

Arwani also said the surge in the index was also attributable
to the maturing of some Rp 1.8 trillion of government treasury
bonds this week, which had caused excess liquidity on the part of
investors.

"The liquidity has been absorbed mainly by the stock market.
That is why the trading is so bullish," he said.

Heriyanto Irawan, head for the newly set up Deutsche Verdhana
Indonesia Securities said the continuous improvements in the
political and macro environments were paving the way for a
leveraged equities recovery.

"Operating conditions have improved for both the public and
private sector... Factors hindering investment have started to
improve and there is a more favorable banking sector to fund
investments," he said.