JSX expects bullish growth next year

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)