JSX likely to slow down in 2nd half of this year

JSX likely to slow down in 2nd half of this year

JAKARTA (JP): The performance of the Jakarta Stock Exchange
(JSX) is likely to slow down in the next six months as investors
are uncertain of both economic and political stability.

A number of stock analysts contacted by The Jakarta Post over
the weekend viewed that the stock market may lose support from
the macroeconomy because of the widening current account deficit
and stringent money climate which will not allow any decline in
interest rates.

On the technical side, JSX share prices increased by up to 22
percent in the first half this year, with the composite index
reaching its highest level of 630 points on April 24, as compared
to this year's opening of 513. This means that only very limited
potential gains are left for the second half of the year.

On the political situation, the analysts said that the impact
on the market of the recent chaos in the Indonesian Democratic
Party (PDI) has faded, but foreign investors may reduce their
activities later this year because the political situation is
likely to be unstable in the preparations for next year's general
election.

"I think the market is going to be bearish," an analyst from
PT Peregrine Sewu Indonesia told the Post.

The analyst, however, estimated that some stocks may
outperform the market. The stocks include those of businesses
with cyclical marketing like pulp, paper and plywood, and those
of the infrastructure sector.

"I think that in the next few weeks, market activities will
slow down as most foreign fund managers are on summer holiday,"
Lippo Securities' managing director, Kelvin Lee, said.

"The market, however, will strongly perform for a few months
after the holiday before it slows again at the year-end because
of political reasons," Lee told the Post.

Lee also estimated that the JSX Composite Index is likely to
close the year at a level above 600.

Commenting the macroeconomic stability, the president of PT
Inter Pacific Securities, L.G. Rompas, said in a long-term point
of view, the macroeconomy situation is positive.

"It's true that most banks might not record high growth
because the central bank has set the ceiling of credit growth for
each bank," Rompas said.

"Currently, banks report an over-equity situation. This
situation may force banks to maintain or even lower their
interest rates," he told the Post.

This situation, according to Rompas, is supportive for the
business of finance, particularly for infrastructure companies.

"Infrastructure-related companies which need long-term
financing like the state electricity company PLN, the state-owned
Bank Tabungan Negara, toll road manager PT Jasa Marga or toll
road developer PT Citra Marga can take advantage of this over-
equity situation," he noted.

"Therefore, in a long-term viewpoint, I would say that this
situation is positive because with better infrastructure, our
economy will get a boost," Rompas added.

Go public

Early this year, the JSX projected that about 30 new companies
will go public this year, including three state-own companies.

It seems that the target is out of reach. Currently, less than
10 initial public offerings (IPO) have been approved by the
Capital Market Supervisory Agency.

An informed source from the JSX said there might be only one
state-owned company to go public, instead of three as declared by
Finance Minister Mar'ie Muhammad early this year.

There is also a rumor that the public offering of PT Pasar
Raya, a retail subsidiary of ALatieF Corporation, might be
canceled.

Analysts, however, still believe that those offerings will
help boost the market, no matter whether the JSX's target is met
or not.

"It's worth noting that investors are now getting mature. It
means that the success of any IPO is now determined by market
forces," Rompas said.

"And I hope that any state-owned company to go public will
also report a success based on market forces and not by
government intervention in its capacity as controlling
shareholder," he said.

Commenting on this week outlook, the analyst from Peregrine
said that share prices might be stagnant on selective buying,
following a rebound on blue chips last week.

JSX share prices went up by 3.7 percent last week with its
composite index rising 21.41 points to close at 594.26 points as
foreign investors were back on blue chips which were slightly
corrected in the previous weeks.

The big caps stocks rebounding last week were Gudang Garam
which closed at Rp 9,975 (as compared to the previous week's
close of Rp 9,150), Indosat at Rp 7,825 (Rp 7,425), Indocement at
Rp 8,000 (Rp 7,575), Indah Kiat Pulp & Paper at Rp 2,275 (Rp
2,175), Sampoerna at Rp 26,500 (Rp 26,175) and Telkom at Rp 3,525
(Rp 3,300).

The JSX recorded a total transaction of 638 million shares
worth Rp 1.9 trillion last week, as compared to the previous
week's 393 million shares worth Rp 989 billion.

The JSX also got a new listing of PT Lippo Karawaci last week.

Lee said the success of the listing of PT Lippo Karawaci, a
real estate company of the Lippo Group, as the first initial
public offering listed on the JSX this year, has helped the
market regain investors' confidence.

In one trading day, Lippo Karawaci recorded total transactions
of 145 million shares valued at Rp 477 billion. Its share price
closed at Rp 3,500, as compared to its public offering price of
Rp 3,250.

"I think some new IPOs will also strongly perform on the
secondary market, including PT Citatah which is scheduled to be
listed on the JSX this week." (alo)