Price rally continues on JSX, but rupiah down

JAKARTA (JP): The price rally continued on the Jakarta Stock Exchange on Friday, with the benchmark Composite Index again breaking the 700-point psychological barrier.

The rupiah weakened on Friday to close the day at Rp 7,295 against the U.S. dollar, down from Rp 7,280 late Thursday despite the surge in share prices.

The dollar traded in a very narrow range between Rp 7,295 and Rp 7,250 during the day.

Securities analysts attributed the bullish trading to a further decline in interest rates at local banks and an improvement in the buying mood in regional markets.

The Jakarta Composite Index rose 3.9 percent, or 26.84 points, to close the week at 707.88 in active trading.

"The continued lowering of interest rates this week could already have sparked the start of a migration of people from investing in bank deposits to equity stocks," the vice president of PT Bakrie Finance Corporation, Dandossi Matram, said.

The benchmark central bank interest rates on one-month certificates of deposit (SBI) fell on Wednesday auctions to a weighted average of 22.50 percent, from 23.48 percent last week.

The SBI rates, which jumped to 70 percent last year on the impact of the central bank's tight measures to cope with strong inflationary pressure, started to decline only three months ago following an improvement in economic fundamentals.

The fall in SBI rates further pushed down interest rates at local banks to as low as 20 percent for one-month deposit.

"The indication that a considerable number of legislative seats would go to reformist political parties is another factor of the strengthening JSX," Dandossi added.

He said that the index could continue to rise to the 1,000 point level by end of the year, providing that the public accept the outcome of the election.

"The 1,000 point level is theoretically possible, considering the significant accumulation of inflation from the pre-crisis level up to now," he said.

Dandossi said market jitters over a possible rise in U.S. interest rates had subdued as investors were convinced by Federal Reserve Chairman Alan Greenspan that only a modest interest rate increase would be possible.

Another local analyst said that, looking at the current developments, the share prices have the momentum for a further increase next week.

This, he said, had provided a wider trading range within which the index would fluctuate.

"We now can talk about an 80 to 100-point trading range," he said.

The stability of the index above the 700-point level will be tested by the market on Monday.

"If it passes the test we will have a new trading range that spans between 700 and 780 points," he said, explaining that the lower figure would serve as the support and the upper as the resistance for trading.

Last time the index breached 700, following the smooth election day, it failed to stay there and went back down to the 600 level.

The analyst explained that within the possible new trading range, movement toward upper 780-point barrier would depend on the poll results and their acceptance by the public.

"First, general foreign investor confidence has given a green light to a bullish JSX. Second, we have good regional markets, now it is up to the internal condition of Indonesia," he said.

Blue chip shares, along with other stocks in the second-liner, saw good gains.

Cigarette-maker HM Sampoerna increased 7.2 percent, a rise of Rp 1,200 to Rp 19,200. Instant noodle-manufacturer Indofood jumped 13 percent, or Rp 1,250 to Rp 11,100. And state-owned Telkom was up 3 percent, or Rp 150 to Rp 4,950.(udi)