JSX expected to maintain upward trend
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) are expected to strengthen this week on renewed buying activities from local investors.
Securities analysts said the banking reform announcement and the temporary freeze in the payment of corporate offshore debts had brought new hope for survival of the country's economy.
"The reform promises a future for the country's economy and many investors will take this as good momentum to enter the market," one analyst said.
The government's announcement last week included a temporary halt in servicing the nation's huge foreign corporate debts in a bid to ease pressures on the beleaguered rupiah and allow time for negotiations.
The rupiah gained ground in Jakarta Wednesday after the announcement of the economic reforms, closing at 9,850/10,800 against the American dollar after hitting a record low of 17,000 early January, a drop of around 80 percent from its value in early July last year.
Stock prices on the JSX also gained ground in response to the stronger rupiah, closing 9.62 points higher at 485.93 Wednesday.
"The government's latest financial and economic measures showed the market that the government is serious in implementing the reforms agreed upon with the International Monetary Fund," an analyst at a local securities house said.
"The market is happy with such concrete steps as finding a kind of solution to the private sector's foreign debt," said an institutional broker with a local brokerage house.
The nation has a total foreign debt of US$140 billion as of the end of 1997, with the private sector accounting for around $66 billion.
But other stock brokers and analysts said the strengthening of the rupiah and stock prices last week was largely attributable to the absence of overseas operators in the financial market.
Financial and stock markets in the region, including Hong Kong, Singapore, Kuala Lumpur, Seoul, Shanghai, Taipei and Thailand, were closed on Wednesday to celebrate the Lunar New Year.
"The strengthening rupiah and stock prices on the Jakarta market did not purely reflect the return of the market confidence in the rupiah and the local bourse. Most investors are still away from the market," another analyst who asked for anonymity said.
Other analysts said that investors would be watching closely the response of the other regional markets to the government's latest reforms this week.
"We just want to see how the rupiah and stock prices will affect regional markets," one analyst said.
Stock analysts mostly believed the rupiah's slight recovery last week would not last long as political uncertainty lingered in the country ahead of the presidential election in March.
They said fears of social unrest from soaring prices and major layoffs due to the monetary crisis could pose a serious problem to the country.
"With such mounting fears on political uncertainty, most foreign investors are reluctant to enter Indonesia's market," the analyst from a local securities house said.
"The general view is that Indonesia's economy will likely to recover in the long term provided that all financial measures are completely implemented by the government," another analyst said.
The JSX Composite Index rose by 7.74 percent to close 34.95 points higher at 485.93 last week from 450.98 the previous week.
The average turnover was 339.26 million shares changing hand last week compared to 562.01 million shares the previous week.
Total average value was Rp 532.22 billion last week compared to 705.03 billion the previous week.
Most blue chip stocks closed higher last week, with state- owned telecommunication firm PT Telkom rising by Rp 75 to Rp 4,300, satellite operator Indosat by Rp 2,000 to Rp 18,000, cigarette maker H.M. Sampoerna by Rp 700 to Rp 4,700, Gudang Garam by Rp 2,700 to Rp 12,700, Bank Internasional Indonesia by Rp 100 to Rp 500 and Bank Dagang Nasional Indonesia by Rp 25 to Rp 300. (aly)