Mon, 07 Jul 2003

Stock index seen mixed despite positive sentiment

Rendi A. Witular, The Jakarta Post, Jakarta

Despite lingering positive sentiment, the performance of the Jakarta Composite Index is expected to be mixed this week due to a lack of fresh positive news and the accounting woes of state- owned telecommunications company PT Telkom, an analyst said.

Budi Ruseno, a stock analyst with Bhakti Capital Indonesia said that this week's trading could remain slow in the absence of new positive news strong enough to lift the index.

"We will see an extremely thin market with the index likely to close at between 498 to 509," said Budi.

The index ended last week 2.69 points lower at 504.09 compared to the previous week's closing of 506.78.

However, Budi said the index could take advantage of an expected bullish sentiment over the rupiah, propelled by the initial public offering (IPO) of giant state-owned Bank Mandiri.

Mandiri's IPO has reportedly successfully attracted investors, including foreign investors, raising the demand for the rupiah for the purchase of the shares.

Budi also said the declining trend in Bank Indonesia's interest rate was also expected to help keep the index above 500.

The central bank has been steadily cutting its benchmark interest rate over the past year to encourage banks to lower their lending rates so that companies can obtain cheaper loans.

The interest rate on one-month Bank Indonesia SBI promissory notes declined to 9.53 percent last week, the lowest since 1998.

According to Budi, the only obstacle that could impede the index's performance was the Telkom case.

Last week, Telkom's executives once again announced that the company would not be able to conclude the reaudit of its 2002 financial report by the July 15 deadline set by the U.S. Securities & Exchange Commission (SEC).

The SEC could delist Telkom from the New York Stock Exchange if it fails to comply with the SEC requirements

PricewaterhouseCoopers is currently re-auditing Telkom's financial statements and is set to complete the work within two months.

Meanwhile in the currency market, the rupiah is expected to continue its climb this weak, supported by capital inflows from investors buying Bank Mandiri shares, a dealer with a local bank said.

"The fact that the U.S. dollar has been weakening recently in the region will also add power to the rupiah," the dealer said.

He predicted that the rupiah would maintain its strong position this week at between Rp 8,160 and Rp 8,210.

The rupiah finished the week higher at Rp 8,185, up from the previous week's Rp 8,290.