Shares surge amid campaign calm

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)