Stock index may falter as election euphoria fades

The Jakarta Post, Jakarta

Jakarta stock prices are expected to further consolidate this week as the bullish sentiment stemming from last week's smooth presidential election has already been discounted by the market, according to stock analysts.

Unless fresh leads are given to the market, the Composite Index is expected to be come under pressure and could even fall below the 800 barrier, Arwani Pranadjaja of Mandiri Sekuritas said over the weekend.

"Even last week, when the index was slightly up, it was mainly because of last-minute buying, which means than the underlying sentiment in 'real-time trading' was not that good," Arwani told The Jakarta Post.

Last week, late buying on selected blue chips and secondliners helped reverse the downward trend of the previous three days after the index reached an all-time high on Tuesday, the day after the election took place.

Thanks to the late buying, the index closed the week 0.6 percent higher at 819.82 points. On Tuesday, it rose to as high as 829.57 before closing at 824.86 points. The trading volume averaged 1.90 billion shares valued at Rp 1.1 trillion (US$120 million), compared to 1.423 billion shares at Rp 1.15 trillion the previous week.

Arwani pointed to three reasons behind his rather gloomy prognostication: the vulnerable rupiah, absence of fresh news from Susilo Bambang Yudhoyono -- poised to be the next president -- and the seemingly inexorable rise in global oil prices.

The local currency closed last week at Rp 9,115 per U.S. dollar, a 0.9 percent drop against the previous week's close.

As for the oil price, which is currently hovering at more than $45 a barrel, many fear that it could hit $50 a barrel, which could create shockwaves on financial and capital markets around the globe, including Indonesia, Arwani said.

"As for domestic factors, while the lineup of SBY's Cabinet could well improve market sentiment, I do not think he will publicly announce the lineup before October," he said, referring to Susilo.

The new government is to be sworn in by Oct. 20.

Another analyst also predicted that the index would falter as the market applied a wait-and-see stance. "The political euphoria is over, everything is now a waiting game," Kim Eng Securities head of research Baradita Katoppo told AFP.

One positive factor could come be the planned stock split on Sept. 27 by Telkom, the nation's largest telecommunication firm and the firm with the largest market capitalization on the Jakarta bourse.

"It will definitely help. But I do not think it will affect the overall sentiment," said Arwani.