Money launderers may be driving stocks to correction

Rendi A. Witular, The Jakarta Post, Jakarta

After enjoying a strong rally through the first three weeks of the year, the Jakarta Stock Composite Index is predicted to run out of steam this week as many bluechip shares are already considered overvalued.

Stock analyst Edwin Sinaga from Kuo Capital Securities said over the weekend that the jump in the Index last week did not reflect the fundamental performance of the market as there was a constant decline in terms of value and volume.

"The shrinking value and volume in the past two weeks has shown that the Index has run out of steam and will probably have a technical correction. Some bluechips shares have also been overbought," said Edwin.

He also said that such a correction was part of a consolidation before the Index touched its psychological level of 800 points.

He projected that the Index was likely to hover between 770 and 800 points this week.

The Index closed at 785.87 last week, up by 2 percent or 15.54 points from the previous week. The Index again hit an all-time high last week since the bourse's inception in 1982.

However, average daily volume declined to 2.2 billion shares worth Rp 1 trillion (US$119 million) from 2.1 billion shares worth Rp 1.06 trillion in the previous week, and from 3.968 billion shares worth Rp 1.52 trillion in the first week of January.

Despite a possible correction, Edwin said that there could be several things that might lift the Index higher.

He explained that shares in state-owned telecommunications company PT Telekomunikasi Indonesia (Telkom) might end higher and help lift the Index up, as there was a possibly that the company may be near completion of its reaudit in its 2002 financial report.

Telkom finance director Guntur Siregar hinted on Thursday that the company might conclude the audit at the end of this month.

However, Edwin said that the surge would only be temporary.

Telkom is the largest counter on the Jakarta Stock Exchange with a market share of 17 percent, meaning that a shift of 1 percent in Telkom shares can move the Index by a great amount.

Concerning rumors that the recent surge in the Index was driven mainly by cash from money launderers, Edwin said that there was a possibility for such practices to occur.

"The rumors concerning such activities are prevalent here among brokers. If, in the coming days, the Index drops sharply, I may conclude that the money coming into the market is not from foreign capital inflows but from money laundering," said Edwin.

Edwin said that other rumors circulating in the market concerned the flow of money from political parties trying to rake in as much profit as possible ahead of the elections, in order to finance their campaigns.