JSX may breach 600-level this week: Equity analysts

JAKARTA (JP): The Jakarta Stock Exchange (JSX) composite index could breach the psychological 600-level this week as bullish sentiment will most likely improve on the back of good news expected from some public companies, securities analysts said here over the weekend.

"Several big companies will release better than expected financial reports this week and will certainly improve the trading mood," an analyst said.

Lukman Hakim, an analyst at PT Ludlow Securities, said that foreign investors, who pulled out from the market two weeks ago, might again reenter the trading floor to test the market.

"Some foreign players started rebuying blue chips last week and more will likely come back this week," he said.

Other analysts shared Lukman's view that the expected improvement in the country's economic fundamentals and in the political atmosphere were the main factors, which brought back investors' confidence.

Lukman added, however, that profit-taking during the first two days of the week was possible, which would then be followed by a favorable market as most share prices were still below their book value.

Positive sentiment will surely be well-supported by the existence of active foreign investors in the market, he remarked.

A big number of foreign investors left the JSX to go for technology-related stocks in other stock exchanges in the region two weeks ago.

"They are now here again to benefit from the cheaper prices of blue chip shares," he said, adding that the larger presence of foreign investors would certainly enliven trading activities.

But an analyst at securities company PT Bhakti Investama was not so optimistic about the presence of foreign investors.

Foreign players on the JSX, who mostly manage portfolio investments from their respective home countries or regional bases in Singapore or Hong Kong, usually take some time to reenter the market here once they pull out, he said.

"It takes time because more parties are involved as foreign investors might have their banks, brokerage companies and stock custodians located abroad, apart from those that they are involved with in Jakarta," he said.

Besides, the decision-making process of foreign investors was usually more time consuming and more thorough than their counterpart local investors, he added.

Complementing the positive sentiment created by the optimistic news on corporate action plans, according to Lukman, was the news on a memorandum of understanding between the JSX and the Amsterdam Exchange on the possible mutual listing between the exchanges in the near future.

"Dual listing with a high caliber stock exchange like that in the Netherlands will easily boost our composite index," Lukman said.

Other analysts said the firm stance taken by the management of the JSX against companies which violated trading regulations also could contribute to the improvement of investor confidence.

The JSX suspended last week the trading of two hospital companies whose merger plan was judged by the exchange management to have a conflict of interest and which would possibly harm public investors' interest.

Another case was an insurance company which had practically changed its core business and as a consequence there was a possibility it was violating the prevailing law on insurance companies.

Unlike stock trading, the rupiah is expected to be mixed this week as demand for dollars will exceed supply, although there is speculation that the Indonesian Bank Restructuring Agency (IBRA) will continue to sell its dollars for rupiah.

IBRA had to convert its dollar holdings in the form of deposits to rupiah to meet its task of paying the government up to Rp 17 trillion by the end of March to help finance the current fiscal year state budget.

IBRA was seen selling dollars late last week, providing a good ground for the value of the rupiah by the end of the week.

The rupiah ended stronger last week against the U.S. dollar at 7,380, compared to 7,448 the previous week.

The JSX composite index surged 8.7 percent last week to close at 596.18 points, up from 548.55 the previous week. The daily average transaction value increased to Rp 992.52 billion last week, compared to Rp 703.11 billion the previous week.

Meanwhile, treasury bonds traded on the Surabaya Stock Exchange (SSX) recorded no transactions for the past three weeks.

It booked transactions worth Rp 6 billion in the three-year floating rate bonds, priced at 96 percent of the bond face value four weeks ago.

The SSX traded Rp 2.16 trillion of the total Rp 255 trillion treasury bonds issued by the government last year to finance recapitalization costs of the country's ailing banks. (udi)