Limited gains for stocks seen this week amid good sentiment

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.