JSX to continue upward movement: Analysts

JSX to continue upward movement: Analysts

JAKARTA (JP): Equity analysts said the Jakarta Stock Exchange
(JSX) Composite Index would stay above the 500-point level this
week as more investors -- shrugging off concerns over political
instability sparked by feuds among elite politicians -- would
take a bullish view of the market.

They said the detention of Bank Indonesia Governor Sjahril
Sabirin by the Attorney General's Office, perceived by many as
having political motives, only temporarily weighed on the JSX
mid-last week as investors reentered the market for relatively
cheap shares across the board.

"Investors have turned their eyes to the economic stories.
They see cheap share prices, yet good performances," one analyst
said.

Budi Ruseno of Bhakti Investama agreed that the Composite
Index was bolstered last week as investors were happy with good
news released during last week by a number of companies following
their annual shareholders' meeting.

He said further announcements would support the market's
rebound this week as many of the firms were expected to have
positive news to announce.

He forecast the Composite Index would range between 505 points
and 530 points this week.

The JSX Composite Index gained 4 percent last week to close at
503.14 points, compared to 484.02 points the previous week.

The daily average transaction value increased to Rp 543.08
billion last week, compared to Rp 459.36 billion the previous
week.

The daily average turnover also increased to 614.37 million
shares from 347.84 million shares the previous week.

"The market will be sensitive about the positive news,
particularly from large corporations next week," Budi said last
Friday.

Such announcements are a reflection of corporate activities
which are seen be investors as a clear message that the country's
economy was running fine, despite the still ailing banking
sector.

Numerous corporations hold their annual shareholders' meetings
throughout June, with some announcing dividend payments,
performance as well as plans and other commitments.

An analyst from a local securities firm said it was fair to
say that the market would down play the domestic political issues
next week as things have seemed to settled down under President
Abdurrahman Wahid's hand.

"President Abdurrahman seems to have control over the
political battle out there. The detention of Sjahril Sabirin
could mean an end to the standoff between them, with Abdurrahman
coming out the winner," he said.

Budi said issues concerning a hike in domestic interest rates
would not weigh on the equity market as investors believed the
magnitude of the hike would not be so significant as to burden
the government in servicing its bank recapitalization bonds.

"We are talking about an insignificant hike in interest rates,
somewhere much lower than 25 basis points. It will give positive
effects to the equity market rather than weigh on it," he said.

He said if the rate hike was significant it would make the
equity market correct itself as some of the investors might cash
in some of their stock holdings and migrate to higher bank
deposits.

With an insignificant increase in the interest rate, the
rupiah is expected to be much stronger, thus inducing more market
confidence.

Sharing a similar view with Budi, another analyst from a state
securities house said the JSX Composite Index was more sensitive
to developments in U.S. dollar interest rates.

The same thing applies to the regional bourses in Asia.

"The market has yet to be more assured that the U.S. Federal
Reserve will really stop raising its interest rates in its late
June meeting over the country's overheating economy," he said.

Unlike the stock market, the rupiah has not fared well this
past week and many dealers expect that the Indonesian currency
will remain weak this week due to the lingering domestic
political instability and weak regional currencies.

A dealer from a Singaporean joint venture bank said the rupiah
had a gloomy outlook for this week, hovering within a tight
trading range of 8,650 and 8,750 per U.S. dollar.

"The detention of Sjahril Sabirin and another round of
questioning of former president Soeharto by the Attorney
General's Office will undermine the rupiah next week," the dealer
said over the weekend.

He speculated that the rupiah would, however, be kept in a
safe range and that it would not breach its current resistance
level of 8,750 as state banks would most likely continue
defending the rupiah in the market like they did last week.

"Something that is most feared by dealers -- the rupiah being
weaker than the important psychological level of 9,000 -- will
easily happen if the rupiah breaches its current 8,750 resistance
level," the dealer warned.

The rupiah nowadays reacts quickly to bad news on one hand,
but hesitates to respond to positive news on the other, he said.

"The only positive news for next week will be the agreement of
the loi (letter of intent) to the IMF (International Monetary
Fund) and the possible upgrading of Indonesia's credit rating,"
he said.

The rupiah lost 1.3 percent of its value last week to close at
Rp 8,685 against the U.S. dollar, compared to Rp 8,570 the
previous week, due to political reasons. (udi)