Mon, 12 May 2003

Profit-taking to limit stock gains: Analyst

Dadan Wijaksana, The Jakarta Post, Jakarta

The Jakarta stock index is expected to rise again this week driven by the current positive sentiment, but gains would be limited by an early "technical correction" after a hefty 4.8 percent surge last week, an analyst said.

Roberto Pardede, a stock analyst at PT Mandiri Securities, told The Jakarta Post on Sunday that the overall market sentiment would remain positive on the back of encouraging news on both corporate and macroeconomics sectors.

"But we're going to see technical correction early on, but then the (rising) trend of the index will continue. I think the index will try to move closer toward 480 points," he said.

Last week, the Jakarta Composite Index jumped by 21.824 points to 469.63, compared to the previous week's closing of 447.16.

The daily average volume also rose to 873.14 million shares worth Rp 575.16 billion (US$68.1 million), as against 715.4 million shares worth Rp 424.38 billion the week before.

According to Roberto, the country's stable macroeconomics, most notably Bank Indonesia's benchmark interest rate -- which fell in last week's auction to 10.91 percent -- became the latest reason for the rising confidence in the economy.

The central bank has been guiding the interest rate lower over the past two years, thanks to the strengthening rupiah and a benign inflation.

On the corporate front, Roberto was betting on recent positive news from the country's largest telecommunication firm PT Telkom to become the engine of the index's upward movement.

"The (financial) result should be encouraging for market players. Telkom news alone, I expect, would be able to drive the index up," he said.

On Friday, Telkom's annual shareholders meeting agreed to hand out some 40 percent of the company's 2002 net profit as dividend payment. The firm said it would provide dividends totaling Rp 3.3 trillion, or Rp 304.26 per share.

Meanwhile, in the currency market, the rupiah is also expected to continue its appreciation trend against the U.S. dollar on the back of continued capital inflows.

"We're seeing investors, mostly foreign players, continue to buy the local unit to invest in the country's capital market. I think this week won't be an exception," a currency dealer at a local bank told the Post.

The capital inflow, he added, was made possible by the country's stable macroeconomic indicators, but most notably was triggered by the sale of Bank Danamon.

The rupiah last week closed stronger at 8,545 per dollar compared to 8,675 the week before.

"But the rupiah's movement will be limited as the dollar will gain from expected tax cut approval by the U.S. Senate, a move that would boost confidence in the U.S. economy," he added.