Shares surge amid campaign calm

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) reentered the 600 psychological barrier on Friday, riding on the wrap up of the country's smooth campaigning period.

On the last day of the campaign period, the JSX Composite Index rose 4.2 percent to close at 612.37 points, with a transaction value of Rp 843.7 billion (US$104 million).

The Indonesian rupiah was also stable, closing a bit stronger at Rp 8,105 against the U.S. dollar, compared to Rp 8,190.

Currency dealers said local participants bought back the local unit following the relatively peaceful campaigning during the last two weeks.

"Most local players were confident Monday's balloting would be peaceful. So, they saw no reason to stay long on the dollar," a dealer with a local private bank said.

Bank Indonesia governor Sjahril Sabirin said on Friday the rupiah should strengthen to the Rp 7,000 level against the greenback after the election.

"The campaign went very smoothly, in which there were no meaningful disturbances. We expect the same thing will happen after the election to support the rupiah to go to the Rp 7,000 level," Sjahril said.

Friday was the last day of campaigning. The day, however, was marred by incidents in several areas in Jakarta, where supporters of the ruling Golkar party were attacked. Nevertheless, the campaigns during the last two weeks were generally peaceful.

The relatively non-violent campaigning also boosted sentiments on the local stock markets, stockbrokers and analysts said.

However, more skeptical market analysts said there were signs that the government was boosting the market through buying in state-owned companies.

A research analyst at Panin Securities, Bona H.L. Tobing, warned that the high index would not be sustained if it was bolstered more by market psychology rather than fundamentals.

"The bullish tendency of the market is not about fundamental economy, but market psychology," he said.

Bona said investors were too hasty in responding to the final day of the obviously non-violent campaign period.

"They should realize that the journey has not ended yet. We still have the election day itself," he said.

He added that after the elections, Indonesians have to wait another three months to see a new president, which would create another uncertainty.

"The country's political risk will be at a minimum after the new Cabinet is formed by the next elected president," he said.

Adrian Rusmana of BNI Securities said that the market was boosted by investors' greater confidence that the country's landmark election on Monday would run smoothly.

Nevertheless, politics was not the only factor for the market surge, he said. The market was also pushed by a buying spree on sectoral stocks, especially agribusiness stocks.

"Agribusiness shares gained attention in response to the government's move of lowering the export tax on crude palm oil," he said.

The government reduced export tax on crude palm oil to 30 percent from 40 percent to stimulate the export of the commodity on Friday.

Adrian also added that continued buying of blue chips further drove the index up. In addition, banking shares which lost ground in the past few weeks finally found an improved sentiment on Friday.

"Investors were initially not too happy when the government first announced the result of bank recapitalization last week, but then we gradually saw a nice progress," he said.

Some blue chip shares had good gains on Friday, with market leader Telkom going up by 8.9 percent to close at Rp 4,275 and Indosat rising 1.4 percent to Rp 16,825.

Banking shares also had good momentum.

Bank Pan Indonesia (Panin) moved up 22.9 percent to close at Rp 1,475, while Lippo Bank edged up 7.1 percent to Rp 375, and Bank Bali was up 6.3 percent to Rp 1,275.

Palm oil producer Astra Agro Lestari's shares were up 6.8 percent to close at Rp 2,350 following the cut to crude palm oil export tax.

It is difficult, however, to predict what direction the market will go, but Adrian noted that foreign investors would likely stay on the sidelines until the results of the elections were known.

"Investors could pose a wait-and-see attitude, observing the outcome of the elections in terms of who gets seats at the House of Representatives and what possible effects will follow," he said. (udi)