Stock index expected to increase, rupiah to remain stable, dealers say

Dadan Wijaksana, The Jakarta Post, Jakarta

The Jakarta Composite Index is expected to move higher this week as positive sentiments continue following the government's plan to increase the size of the Bank Mandiri stake sale, an analyst said.

The government said last week it might increase the offering of Mandiri's shares to 20 percent from the initial 15 percent, primarily due to signs of strong demand. Mandiri is the largest bank in the country.

The initial public offering (IPO) is scheduled for the first week of next month.

"This (the increase in Bank Mandiri's share offering) has added to the optimism of the market, which is already buoyed by the falling Bank Indonesia interest rate and strong rupiah.

"As a result, the index has a good chance of rising again this week." a stock dealer at a joint-venture bank said on Sunday.

In last week's trading, the index closed slightly higher at 511.45 points from 510.48 the week before, with daily trade volume averaging Rp 469.2 billion (US$57.2 million) as compared with Rp 588.5 billion the previous week.

The sentiment in the market has been positive since the beginning of the year, boosted by the country's improved macroeconomics situation.

While the rupiah has appreciated by close to 9 percent since January, making the inflation more controllable, the central bank has cut its benchmark interest rate by around 3 percent during the same period.

At present, the interest rate stands at a multi-year low of 9.71 percent.

All have proved helpful in boosting market sentiment.

The index still was hovering slightly above 410 points early in 2003, or around 20 percent lower compared with the current level.

"This has been going on for months. And since there is no bad news so far that could disrupt the current sentiment, I see no reason for the index not to continue its upward path," the dealer said.

On the currency market, a local dealer said expectations of continued capital inflows would boost the rupiah's value against the U.S. dollar.

"But, the range will be narrow, as there is also a concern that an overly rapid strengthening of the rupiah would hurt exporters. I think the rupiah will be moving in a range of 8,150 - 8,250 this week," the dealer said.

The local unit closed at 8,240 per dollar last week, relatively stable compared to 8,225 in the previous week.

The country has witnessed a surge in capital inflows for the past several months as investors are enticed by the sales of local assets -- including sales of IBRA's assets, divestment and privatization programs -- and high-yield bonds.