'January effect' blunted by fears of U.S. rate hike
'January effect' blunted by fears of U.S. rate hike
JAKARTA (JP): Fund managers are expected to start the year's
buying program, intensifying their activities at the Jakarta
Stock Exchange (JSX) and raising the composite index this week,
according to stock analysts.
However, they fear the bullish sentiments, dubbed the "January
effect", could be undermined to some extent by nervousness over
the possible hike in United States interest rates.
"We will see a bullish but volatile market next week," an
analyst with a joint-venture securities house said over the
weekend.
Buying sentiments usually increase in January -- a phenomenon
called the January effect.
However, a selling-spree hit the JSX and other stock markets
in the region in the middle of last week following sharp
overnight drops on Wall Street in fear of the possibility that
the U.S. monetary authority would raise interest rates to prevent
the economy from overheating.
But, investors here downplayed the impact of the possible
increase in US interest rates, noting that the JSX quickly
rebounded late last week.
"Strong domestic fundamentals are more influential to the
market than external factors such as U.S. interest rates," an
analyst said.
Ferry Yosiahartoyo from Vickers Ballas Tamara said the
country's strong economic fundamentals could be seen in lower
inflation and interest rates.
He said the January effect would prevail in the JSX in the
weeks to come.
"The January effect will prevail and the composite index will
rise to the 1,000 level," he said.
Consumer demand in the country had recovered while prices of
goods and service remained stable, Ferry said.
He said companies could now sell their products in the form of
goods and services at relatively higher prices, thus creating
higher revenues.
"Higher revenues mean higher value for the companies," Ferry
said.
In addition, Ferry said, many companies have emerged stronger
having overcome problems caused by foreign exchange loss last
year.
"The value of the rupiah is currently stable with an
increasing trend," he said.
With all the positive factors Ferry was optimistic the JSX
Composite Index would be on the increase starting this week,
assuming there were no disruptions in the country's political and
economic climate.
Other analysts said communal clashes between Muslims and
Christians in Ambon have had no significant impact on the market
as investors were more interested in economic factors.
On the Y2K issue, Ferry said the market was pleased that no
computer troubles had occurred in the capital market as well as
other big institutions.
Ferry said starting this week the JSX composite index would
correct itself having been freed from the pressure of Y2K fears.
"Y2K is a past burden, now we know that it is gone," he said.
However he said foreign investors would probably need an extra
one or two weeks to convince themselves that the JSX was Y2K
compliant.
Another analyst said technology-related stocks would be among
the best-sellers this week.
The JSX Composite Index increased 1.7 percent to close the
three-day trading week at 688.52 points last week, from 676.91
the previous week.
Its daily transaction values stood at Rp 1.24 trillion on an
average daily turnover of 979 million shares last week.
Last week's top gainers were PT Astra Graphia, rising 132.73
percent, PT Bank Bali (100 percent) and PT Fajar Surya Wisesa
(84.85 percent).
The week's big losers were PT Lippo Land Development, down
35.71 percent, PT Bank Danamon (22.22 percent) and PT Bumi Modern
(18.18 percent).
The top brokerage firms by transaction value were PT Danareksa
Sekuritas with Rp 382.5 billion, PT Bomar Securities (Rp 289.9
billion) and PT Jardine Fleming Nusantara (Rp 283.5 billion).
Due to the Ramadhan holiday, the JSX closed last Friday and
will reopen on Tuesday.
The rupiah decreased 1.1 percent to close the week at 7,167
against the U.S. dollar, compared to its 7,087 close the previous
week. (udi)