Mon, 12 Jul 2004

Limited gains for stocks seen this week amid good sentiment

The Jakarta Post, Jakarta

Having risen by 2.2 percent last week, the Jakarta stock composite index is likely to extend its upward trend this week amid continuing positive sentiment but at limited range, as the market awaits for new leads.

"As the overall sentiment remains good, I expect the trend will continue but only slightly, especially as the rupiah is likely to gain further against the dollar," market analyst Dodi Prawira told The Jakarta Post over the weekend.

A further appreciation in the rupiah, while set to benefit firms with dollar-dominated debts, would hurt others as it made local share prices more expensive to foreign investors, Dodi said.

"So if the rupiah continues to strengthen, which I think it will, progress in the stock index would be limited. The index's rise of about 1 percent should already be good," he said.

Analysts said the July 5 presidential election marked a successful step in the country's democracy, with the process carried out orderly and peacefully. This boosted market confidence and the performance of the rupiah and the stock index, they said.

The composite index closed last week at 761.14 points, up 16.115 points from the previous week's closing, with the daily volume averaging 1.83 billion shares worth Rp 1.03 trillion (US$114 million) as against 1.26 billion shares worth Rp 636.32 billion the week before.

On the currency market, the local unit on Friday reached its highest level in about two months to close at 8,935 per U.S. dollar.

Dodi said several planned corporate announcements would also help boost sentiment. Plans for a stock split by mining company PT International Nickel Indonesia and telecommunications giant PT Telkom were examples, he said.

Controlled by Canadian mining giant Inco, the company now has 248.4 million shares or 20.09 percent of its total shares held by public investors. Following the one-to-four stock split, the face value of the firm's shares is expected to drop from Rp 1,000 to Rp 250.

As for market-leader Telkom, it planned a two-for-one stock split in a bid to boost the liquidity of its shares in the stock market.

"The stock-split plan will likely encourage more active trading as it will increase the perception of cheaper share prices," Dodi said, while insisting that the index's overall rise would still be limited.

A dealer at a state bank agreed, saying the market would be more cautious while it waited for further progress in political affairs, notably the coalition-building between presidential candidates ahead of the runoff election in September.

"The trading is likely to be less active this week as long as there are no positive leads, with the market being cautious over the possible forms of coalitions," he said.

With more than half of the voters counted, Susilo Bambang Yudhoyono is almost certain to go through into the second round.

Contesting for second place are incumbent President Megawati Soekarnoputri and Wiranto, with the former holding a narrow lead.