Positive market sentiments still loom

Dadan Wijaksana, The Jakarta Post, Jakarta

With positive sentiments still looming in the market, the movement of the Jakarta Composite Index will be relatively stable this week and will hover at a thin range, according to analysts.

Unlike last week's trading, buying actions on blue chips shares are expected to be less active throughout the week, increasing chances that the index may experience a slight correction.

Despite there being only four days of trading last week, the index managed to climb sharply on the back of a foreigner-led buying spree on the market's top shares.

The index rallied to a close higher for a third consecutive week to close at 459.38 points, higher than 449.38 points the week before.

"The index will stabilize this week, although we cannot rule out the possibility of the index going down a bit," stock analyst Dandossi Matram said over the weekend.

Dandossi attributed the upward movement of the index to the government's ability to maintain the market's positive atmosphere, gradually reducing the political and security risks for the market.

The relatively stable environment has managed to prevent foreign investors, who have been the main cause of recent index movement, from fleeing.

Zulfikar, stock analyst of Mandiri Sekuritas, was also of the opinion that there would not be a sharp change in the index for this week, either upward or downward.

"There is still going to be buying action on blue chips, but overall, the index will not change much" he said.

Zulfikar also brushed aside the negative impact of the planned pullout of the biggest U.S. pension fund from four Southeast Asian markets, including Indonesia, saying the firm had only invested small amounts in the country.

On Thursday, the California Public Employees' Retirement System (Calpers) blacklisted Indonesia, Thailand, Malaysia and the Philippines, claiming the countries did not meet its new investment criteria, including human rights and labor practices.

Calpers have included social issues such as human rights, transparency, social stability and labor laws in its investment guidelines, aside from financial factors.

While the announcement had only a minor impact in Malaysia and the Philippines, Indonesia, by and large, ignored the news for most of the session. Thailand shares were hit the hardest but mostly due to profit-taking rather than uncertainty.

Although the company has an investment portfolio worth US$150 billion worldwide, investment in each of the four countries only stands at less than $100 million.

In the currency market, Calpers' move also had an insignificant effect on the rupiah, as foreign exchange markets in Jakarta showed little reaction to the news.

The rupiah ended Rp 10,180 against the dollar, up from Rp 10,245 the previous week.

Currency analyst Wiwan Widjaja believed that, for now, internal factors would pose a bigger threat to the local currency than external ones.

"Rupiah movement will not be too far away from previous weeks, stable with a tendency to strengthen slightly," he said.

The positive trend would continue this week because there is little sign of negative market sentiments, he went on.

While it is inevitable that there will be a high dollar demand from domestic companies repaying their maturing debts, dollar selling by the Indonesian Bank Restructuring Agency (IBRA) will offset the losses.

Wiwan added that Bank Central Asia's disposal progress would be watched closely as it is nearing its end.

With all those arguments, Wiwan predicted the rupiah would be hovering between Rp 10,150 and Rp 10,250 against the dollar.