JSX anticipates return of some foreign investors

JAKARTA (JP): The Jakarta Stock Exchange's (JSX) optimistic projection of the return of some foreign investors will not necessarily spur buying due to profit taking by local investors, analysts said over the weekend.

Senior analyst at Panin Sekuritas Hendra Kustarjo estimated that some foreign investors who had previously adopted a wait-and-see attitude, would reenter the market to benefit from the international community's growing confidence in the local market.

He however ruled out a buying spree, saying foreign investors would only be testing the market by buying selected blue chip stocks.

"Their comeback is certainly good news for the market even though their transaction won't be substantial enough to affect market sentiment," Hendra said.

He said the improving relations between the International Monetary Fund (IMF) and the Indonesian government after the release of a full audit report by PricewaterhouseCoopers on the Bank Bali scandal had finally led foreign investors to reenter the JSX to buy selected shares.

The IMF had suspended disbursement of aid until the report was released.

The JSX Composite index ended the week at 626.04, as compared to 593.86 the previous week.

The index made good gains last Thursday and Friday on mild foreign buying that also prompted local participants to follow suit.

"Considering their careful and stable move last week, such restarting of foreign buying at the JSX is not an easy-come-easy- go thing at all," Hendra said adding that in the coming week trading would perform better than the previous week.

Other analysts also said that expectations that most companies would report higher nine months earnings this year on falling interest and inflation rates would further support the index.

Some analysts said however that fears of profit taking this week were also reasonable because many shares had been hit by market rallies over the visit last week of IMF's director for the Asia-Pacific Hubert Neiss.

Neiss arrival in Jakarta last Monday was welcomed by the market as an indicator of the resumption of the suspended international loan programs to Indonesia.

"All the positive sentiments about Neiss' visit have been factored in well since early last week," an analyst said.

He said the effect of Neiss' visit's would have completely faded and would spark profit taking this week.

Neiss left Jakarta last Friday after giving upbeat signals on the resumption of the international loan package to Indonesia.

He said the IMF review team would soon come to Indonesia to discuss the country's economic reform programs. The completion of such discussions is a prerequisite to the continued disbursement of the IMF-backed international loan.

Y2K concerns

Commenting on the growing fear of the millennium bug and concerns that it might disturb JSX trading, Hendra said that investors had too many exaggerated fears about the possible Y2K impact.

Hendra said some of the Y2K fears might be felt as early as this week.

He discounted such fears saying that the computer systems used in Indonesia were relatively new as compared to the developed nations of the United States and many European countries.

"Not until the 90's has Indonesia really used computers intensely in any operating systems, including that of the JSX," Hendra said.

"New computers are mostly Y2K compliant," he added.

Vickers Ballas executive director Imamat Dalimunthe agreed with Hendra's optimism. He earlier said that trading on the JSX was not as sophisticated as trading in other Asian countries such as Malaysia and Singapore.

He said in terms of operations, there were no interconnections between the JSX and securities firms.

"We are not yet interconnected. In the interconnected system a problem in one securities firm can paralyze the whole exchange's operating network, thus the trading system," he said.

However an analyst from a state-owned securities firm said Y2K could still be a problem if the JSX was unable to deal with the problem despite the non-interconnection.

"The Y2K-related computer problem within JSX alone could disturb the exchange's trading. If trading had to be halted, then securities firms could not do their activities, thus upsetting their clients," he said.

"There is no need for an interconnection between JSX and the securities firms to paralyze the trading activities."

He said the source of the problem could be from a Y2K-related operating failure between the JSX and its separate clearing and settlement agency during the process of a transaction.

The JSX Composite Index increased 5.4 percent to 626.04 points last week, from 593.86 points in the previous week.

The average daily turnover last week decreased to 681.6 million shares, compared to 710 million shares the previous week.

The average daily transaction value decreased to Rp 672 billion last week from Rp 689.2 billion the week before.

The rupiah closed flat at 6,850 to the U.S. dollar last week, compared to its 6,903 close the previous week. (udi)