Positive sentiments to boost JSX

JAKARTA (JP): The stock market is poised for more gains in this week's trading as investors rush in amid growing confidence that the upcoming People Consultative Assembly special session will bring fresh hope for the resolving of the country's political problems.

Investment analyst Erwin S. Widjojo of PT Indovest Securities said confidence was running high that the Assembly's special session could restore political stability to the country.

"The Assembly session carries with it the hope of political change, a return to stability," Erwin told The Jakarta Post.

Although the Assembly is unlikely to convene earlier than schedule in August, most investors have decided to enter early, he said. They were snatching up shares before any possible market euphoria erupted after the Assembly session.

He said that others who feared missing out on the potential gains had already jumped in further contributing to last week's gains in the market index.

Over the past two weeks the index has been on a steady upwards path led by gains in blue chip shares. The Jakarta Stock Exchange (JSX) Composite Index closed the week at 437.59, up from 417.56 in the previous week, and from 398.81 the week before.

Erwin said the prospect of making gains after the session had encouraged many players to invest despite the as yet unstable political landscape.

The decision to hold the special session, with the likely outcome of the president's impeachment, did lend some certainty on the political front.

The Assembly will demand that President Abdurrahman Wahid account for his alleged involvement in two financial scandals.

President Abdurrahman maintains his innocence.

Countermoves by the President to thwart his foes and to prevent his ouster have come to naught so far. The market is still awaiting the political impact of the sudden cabinet reshuffle two weeks ago.

The most striking moves so far have come from newly appointed Attorney General Baharuddin Lopa as he clamped down on corruption cases implicating political foes of the President.

Erwin also believed that foreign investors had reentered the market as was indicated by the sharp rise in transaction values.

He doubted that local players could have caused transaction values to have more than doubled over the past few days.

"But it's too early to confirm to what extent they (the foreign investors) have returned, I don't think they're the big investment houses," he said.

He said the government could also have intervened in the stock market to encourage foreign investors to return.

This could mean buying up shares in state telecommunications firms PT Telkom and PT Indosat so as to make it appear that their shares were being actively traded and promising, he explained.

Propping up Telkom and Indosat's shares would be in line with the efforts to seek strategic partners for the two companies as part of the government's divestment program.

Besides a push from the political front, most investors also expect the index to gain on a technical rebound, he went on.

"In the months of August and September, we usual see a technical rebound ... people buy now while its cheap and with a bit of patience their investment will pay off," he said.

Blue chip shares were the most sought after, but firms that had recently announced plans to pay out dividends were also being targeted, he added.

Erwin predicted that the JSX index would maintain its upward trend, with the possibility of breaking the 450 level.

Elsewhere, PT Bhakti Investama senior vice president Budy Ruseno concurred with Erwin, saying the potential for more gains in the index were high.

A combination of political developments and corporate news would drive the market this week, he predicted.

"The market is optimistic about a solution that will end the current political impasse," Budy said.

He said that even if the special session triggered clashes between pro and anti President Abdurrahman mobs, most investors were upbeat that the violence would be only temporary.

Budy recommended buys for shares in the cigarette, retail and telecommunications sectors, and those in the Astra Group.

For this week's trading, he saw the index resistance level being 440, where investors are prone to profit-taking.

But according to Budy, the market shows good prospects of breaking that level and hitting 460, though probably not this week.

In the money market, the rupiah has maintained its tight trading band, but dipped to 11,300 against the U.S dollar following a series of violent protests against the new fuel prices.

The local unit closed last Tuesday's trading at 11,380, down from 11,280 the day before, on news of continued violent protests.

The government's move to hike fuel prices by an average of 30 percent led to a week of nationwide protests, some of which turned violent.

Overall, trading was quiet as most players preferred to wait out the political uncertainties before taking up positions.

Analysts said this trading mood was likely to prevail, with the rupiah likely to strengthened slightly in the run up to the Assembly's special session on speculation of a new president being appointed.

But they also warned that corporate demand for the dollar remained high in the long run as many companies had foreign debt payments to meet.

The rupiah closed last week's trading at 11,355, much lower than the previous week's close of 11,247.(bkm)