Market will remain dull as investors lack choices
Market will remain dull as investors lack choices
JAKARTA (JP): The general outlook for the local equity market
will remain gloomy this week as some popular stocks, which were
the driving force in the market over the last two weeks, are now
overvalued, according to securities analysts.
Meanwhile, commodity trading on the Jakarta Futures Exchange
(JFX) remained stagnant due to lackluster trading in the physical
market, a brokerage firm said.
Analysts are predicting that the prices of some popular stocks
might retreat.
"I prefer to say that the market might weaken," market analyst
Dandossi Matram said.
With the grim outlook for popular stocks, the choices for
investors will be very limited as the prospects for other stocks
are still too uncertain.
He said that the surge in share prices over the last two weeks
was due more to technical factors than to fundamentals. "That's
why it's difficult for these stocks to maintain their
performances," he added.
According to him, the rise in the JSX Index last week was
mainly the result of a switch in foreign fund managers'
investment strategies following the restriction imposed by Bank
Indonesia on rupiah forward trading.
The new regulation, which, among other things, bans onshore
banks from trading rupiah with offshore banks, has forced many
foreign funds managers to switch their Indonesian portfolio to
the stock market.
"This has been the main reason whey the index has gone up, it
wasn't politics nor the Fed's (United States Federal Reserve)
interest rate cut," Dandossi said.
For this week, he said, a technical correction was bound to
hurt the local market if market sentiment remained negative.
He added that on a global scale, equity investors might hold
on while waiting for the release of statistics that might confirm
the U.S. economy was sliding into a recession.
"Even Alan Greenspan cannot foresee the next four months
ahead, what can we expect from the rest of us," he said referring
to the U.S. Federal Reserve chairman.
The market would need to rely more on local investors for
another boost, he continued.
He suggested investors adopt a longer-term investment
strategy, as many companies were performing well over the long
term.
"I would advise investors to take a long-term approach by
buying shares of companies with a promising outlook but which are
currently in difficulties due to their debts," he said.
Dandossi referred to companies like PT Indah Kiat Pulp & Paper
Corporation and PT Pabrik Kertas Tjiwi Kimia, both of which are
subsidiaries of the heavily indebted Sinar Mas Group.
The business group has come under the media spotlight
following its gross violation of the legal lending limit ruling
in respect of its subsidiary Bank Internasional Indonesia, and
the possibility of a default on bond payments by another
subsidiary Asia Pulp and Paper (APP).
Dandossi said that if Sinar Mas could weather the storm,
shares of Indah Kiat and Tjiwi Kimia were likely to rebound
sharply.
Analyst Roberto Pardede of Bank Mandiri sounded a more
optimistic note, saying that a technical correction may be
averted if reports of companies' financial performance start
hitting the market.
"At the end of February, we will likely see a lot of reports
for 2000 coming out," he said.
But Roberto did not rule out the possibility of a correction,
saying that volatile trading was likely this week.
He said that shares in PT Telekomunikasi Indonesia (Telkom)
were a good bargain, after the company acquired a 100 percent
stake in cellular operator PT Telekomunikasi Selular (Telkomsel).
Last week, Telkom and PT Indonesia Satellite Corporation
(Indosat) agreed to end their cross-ownerships in three of their
subsidiaries.
Under the deal, Telkom will spend $945 million and Indosat
$599 million in exchanging ownership of their subsidiaries.
With the purchase of Telkomsel, the country's largest cellular
operator, Telkom may receive a boost for its future financial
performance, Roberto said.
The unexpected announcement of the deal on Thursday caused a
rally in the two companies' shares, pushing up the JSX Index to
end the day 17 points higher at 440.22 compared to 423.21 the
previous day.
But immediate profit taking on Friday led the JSX index to
fall to 432.08, ending the week only slightly up from Monday's
opening level of 427.91
On the currency market, a dealer with a Singapore joint
venture bank predicted continued mild trading of the rupiah.
According to him, the implementation of the non-deliverable
forward (NDF) market for the rupiah in Singapore posed no
immediate threat to the local unit.
"When trading starts on Monday, the impact will be
insignificant," the dealer said.
Several major Singapore banks agreed to create an NDF market
for the rupiah to allow the offshore trading of the currency for
speculative purposes.
The NDF's creation is a response to Bank Indonesia's new
ruling, which limits speculative offshore trading of the rupiah.
But the NDF market gets around the ruling by making
settlements in U.S dollar, thus eliminating the need for offshore
rupiah.
Analysts fear the rupiah's fluctuations in the NDF market
could influence its movements on the local market.
But the dealer said that during the first weeks of the NDF,
the influence would be minimal.
"Banks here are not accustomed to such non-deliverable forward
markets, we will need time to absorb its mechanisms," he
explained.
For this week, he expected the rupiah to remain flat at a
level of around 9,600 to the U.S dollar.
Commodity brokerage PT Danagraha Futures recommended a wait
and see stance for olein and robusta coffee, because of low
trading for olein and declining prices for robusta coffee in the
physical market.(bkm)