Profit taking predicted to dominate Jakarta shares
JAKARTA (JP): The rupiah is likely to remain steady this week but local share prices are expected to bounce off their highs on profit taking following last week's strong gains, analysts said over the weekend.
They said market sentiment would likely remain good this week as international money would start flowing in, which would possibly give a boost to the beleaguered rupiah.
Currency dealers said the rupiah could strengthen further if state banks continued to support the currency like they did last week.
A dealer with a local private bank said if the rupiah shot to the 12,000 level against the U.S. dollar this week and stayed at there for a while, it would indicate stability and the tendency would be for the currency to strengthen, possibly to 10,000 over the next few weeks.
"But if the rupiah weakens again to the 14,000 level, it would show that the strengthening of the rupiah these past few days was only technical, that is due to intervention, and it would be difficult to bring it even to the 12,000 level in the short run, unless the government intervenes in the market again."
The rupiah closed last week at 13,350 to the dollar, or some 9.5 percent stronger than the Rp 14,700 to the dollar the week before.
Nevertheless, dealers said, the movement of the Japanese yen and regional currencies would also affect the fate of the rupiah, which had suffered the largest depreciation among regional currencies.
Technically, however, the rupiah should stay relatively strong because, unlike previous weeks, local banks have become dollars sellers as the central bank has promised to back them up any time they need foreign exchange, he said.
Previously, domestic banks in search of U.S. dollar funding were forced to buy the greenback on the spot market due to a lack of credit lines to offshore banks.
In addition, they said, the market in general was anticipating the strengthening of the rupiah because of more incoming foreign aid.
The disbursement of foreign loans, however, will not stimulate firm buying on the Jakarta Stock Exchange (JSX) because the market recorded too many big gains during the last two weeks, analysts said.
The JSX Composite Index closed last week 4.9 percent, or 22.654 points, higher at 486.234 over the week.
Daily turnover for the week averaged 402.62 million shares worth $33.94 million, compared to the average of 255.25 million shares valued at $22.8 million the previous week.
Socgen-Crosby Indonesia' head of research Goei Siauw Hong predicted that the market would make a slight rally in the beginning of the week but then would start to decline.
"So much good news has come in and the market will still be happy in the beginning of the week before a correction sets in," Hong said.
Stimulus
He said the market was now waiting for real economic stimulus from the government to stop the contraction in production and revive economic activities.
"The market is looking forward to real economic policies, not only social safety net programs," he said.
Bahana Securities' associate director and head of equity sales Andre Cita agreed that profit taking would rule the market this week.
However, Cita predicted that foreign investors would continue buying after a relatively long pause following massive rioting in Jakarta and other cities in May.
"I would expect the market to have few points here and there of some profit taking, But I would also expect to see some more foreign participation," he said.
He noted that some stocks, especially of those dollar earners, would seem relatively cheap in dollar terms, compared to their precrisis prices.
"So they would have to be very, very attractive in this point of time to some foreign investors."
He said a stable rupiah, a stable social situation and, more importantly, privatizations would continue to influence the direction of the market in the near term.
Vickers Ballas Tamara' head of research Noraya Soewarno said the issue of privatization of listed state banks would always spark some speculative interest among domestic investors.
"If more positive news about the privatization of state firms is coming, I expect more buying on those stocks will set in," she said.
State cementmaker PT Semen Gresik and state mining firm PT Aneka Tambang became the targets of speculative buying during the last few weeks due to the government's privatization plans for the firms.
Semen Gresik gained Rp 750 to close last week at Rp 12,050 from the previous week's close of Rp 11,300. Aneka Tambang rose Rp 425 to Rp 2,475 from Rp 2,050.
Heavyweight state telephone monopoly PT Telkom closed trade last week at Rp 4,625, compared to the previous week's close of Rp 4,350. State-owned satellite operator PT Indosat closed at Rp 16,200, compared to the previous week's high of Rp 17,800.
Cigarette giant PT Gudang Garam closed the week at Rp 8,400 from the previous week's close of Rp 8,450. Competitor PT HM Sampoerna gained Rp 125 to Rp 2,625, compared to the previous week's close of 2,275. (rid)