JSX expects bullish growth next year

JAKARTA (JP): Better economic growth, share-price correction and some monumental changes in trading and policies will push the Jakarta Stock Exchange (JSX) to bullish levels in 1995, the president of the exchange says.

Speaking at a year-end press conference here yesterday, Hasan Zein Mahmud, however, warned that high inflation, interest rates and increasing deficits in the balance of payments will influence the performance of the JSX.

"Foreign fund managers predict that next year's inflation will remain high, at around eight or nine percent, as will the interest rates. Both are the most influential factors on the trend of stock markets," Hasan said.

He noted that although the JSX Composite Index fell to 469.64 yesterday from 588.77 on the last trading day of 1993, the market was able to mobilize funds at a new record high of Rp 10.9 trillion (US$5 billion) this year.

Hasan predicted that the JSX will show an even stronger performance next year as most analysts are upbeat on the country's economic growth.

Besides, he said, share-price correction on the JSX is underway. This year's average price earning ratio stands at 15 times, much lower than last year's of 25, when the JSX enjoyed its boom.

"In the coming year, people will be more tempted to buy shares on the JSX when share prices are not as expensive as before," Hasan said.

He predicted that around 40 more companies would enter the JSX, bringing the total number of listed firms to 260 next year, while blue-chip shares would remain the prime mover of market activities.

The 20 most active shares are expected to lose their domination of trading activities by 50 percent. This year they have dominated the activities by 56 percent and last year by 61 percent.

Bullish

Hasan predicted that companies operating in infrastructure, utilities, retail, consumer products, pharmacy and cosmetics would likely enjoy bullish growth next year because of people's increasing purchasing power.

Labor-intensive companies, such as those operating in textiles, wood products, sport shoes and handicrafts, may be facing a bearish future and will surely lose some of their comparative advantages, such as low labor costs, on the world market, Hasan said.

Hasan said that next year, the JSX will see some monumental changes, including the introduction of scripless (paperless) trading and the possible passing of a stock market law by the House of Representatives.

Hasan believes that these changes will triple average daily trading activities on the JSX to 5,000 transactions next year from 1,539 this year and double the average daily turnover to Rp 204 billion (US$94 million) from Rp 104 billion.

The JSX is scheduled to start an automated trading system early next year when it occupies its new building on Jl. Sudirman, South Jakarta, and introduce scripless trading later on.

According to Achmad Daniri, director of trading, the new trading system will be able to handle 50,000 transactions per day and carry out 40,000 buy and sell orders per hour.

The present manual system is only capable of handling 3,800 transactions per day.

Hasan said the JSX will also be linked to computer terminals in a number provincial capitals to let more local investors enter the JSX.

However, he declined to mention which cities would be served with computer terminals, saying that at least all provincial capitals in Java will have such facilities.

Hasan also noted that starting next year, open-end investment companies will be allowed to operate to attract more small local investors.

"If more and more local investors can be mobilized, I hope the domination of foreign investors can be reduced," Hasan said, adding that foreign investors are very dominant this year, dominating almost 80 percent of total trading activities, as compared to last year's 70 percent.

He calculated that the activities of domestic investors would increase to 35 percent next year from 23 percent this year. (rid)