Short term bullish view at JSX likely

JAKARTA (JP): The upward movement in share prices on the Jakarta Stock Exchange (JSX) is likely to continue this week on positive developments on the country's political and economic fronts, equity analysts say.

Budi Hikmat of PT Bahana Securities said over the weekend that a number of investors had begun to take a bullish view of the market last week when political tension caused by the Cabinet reshuffle finally subsided.

Clarity concerning the next disbursement of the International Monetary Fund (IMF) loan package and apparent support from the Middle East and other Asian countries for Indonesia's efforts to increase its foreign direct investment should further boost investors' sentiment this week, Budi added.

"There are plenty of chances for the market to be bullish next week," Budi said over the weekend.

Other analysts are still anxious over the degree of impact on the local exchange if the U.S. government -- in its next chance mid this month -- to dramatically increase its interest rates.

A 30-year low unemployment rate in the U.S. has created widespread speculation that the U.S. government will increase interest rates by 50 basis points, as opposed to earlier expectations of 25 basis points.

Governments normally increase interest rates to abate people's increasing purchasing power when the number of job opportunities surge.

The high interest rate environment, in turn, often causes a shift of investment money from the equity market to fixed income instruments such as bank savings accounts and time deposits.

Budi admitted that such external factors might play a role in affecting the local market this week. Thus, he said, investors here would be rather more cautious now as they actually need to digest every new bit of information and development before making a move.

Other analysts speculated that the government this week would begin to support the market ahead of the initial public offering (IPO) of PT Bank Central Asia (BCA), which has been slated for the end of this month.

"Such speculation makes sense because the government has the greatest interest in making Bank BCA's IPO successful," said an analyst with a state securities company.

Another supporting factor would be the market expectation of a possible rebound of blue-chip shares this week, which previously have been fundamentally undervalued.

Currency dealers said the rupiah was traded in a relatively thin volume with a lack of participants generally last week.

However, local companies and state banks were seen in the market buying some dollars to pay for imports and matured foreign debts, they said.

The rupiah will easily breach the 8,000 level if the U.S. government indicates this week that it will significantly increase interest rates.

"We see a scenario in which the Indonesian government considers increasing rupiah interest rates as well to defend the currency's value against the greenback," one dealer said.

The rupiah weakened slightly last week to Rp 7,985 to the U.S. dollar, compared to Rp 7,935 the previous week.

The JSX Composite Index increased 3.6 percent last week to close at 545.61 points, compared to 526.73 the previous week. Daily average transaction value increased to Rp 371.56 billion last week, compared to Rp 323.46 billion the previous week.

The daily average turnover, however, decreased to 294.4 million shares from 349.8 million shares the previous week.

Last week's top gainers were PT Asiaplast Industries, whose shares were up by 220.83 percent, PT Alakasa Industrindo, 38.46 percent, and PT Steady Safe, 37.50 percent.

Cash dividend announcements were made by PT Trimegah Securities, PT Surya Toto Indonesia, PT HM Sampoerna, PT Timah and PT Indosat.

The week's big losers were PT Argha Karya Prima Industri, whose shares fell by 29.17 percent, PT Lion Mesh., 21.15 percent, and PT Bank Universal, 20 percent.

Last week's new issue of shares was PT Asiaplast Industries.

Top brokerage firms by transaction value were PT Vickers Ballas Tamara with Rp 214.62 billion in transactions, PT Jardine Fleming Nusantara, Rp 166.70 billion, and PT Merrill Lynch Indonesia, Rp 162.19 billion. (udi)