Stock market expected to recover next year

JAKARTA (JP): The ailing domestic stock market is expected to recover only in the second semester of next year as big investors still need more time to enter the market, according to a market executive.

Felia Salim, a Jakarta Stock Exchange (JSX) director, said here yesterday that most of the stocks traded on the Jakarta bourse had been very cheap but investors were still wary of reentering the market due to the unfavorable monetary condition both at home and overseas.

She said that around 40 percent of the stocks on the JSX had been traded below their par value of Rp 500 and around 60 percent had been traded below their book value as of Nov. 21 this year.

"This means that the stocks are cheap already and I think foreign investors with a long-term target will certainly be interested in buying these stocks," she said.

She said she believed some foreign investors had reassessed the market and started to selectively buy certain shares, especially those related to oil, mining and export-oriented companies as well as agricultural-based industries.

"At least long-term investors will invest in these stocks," she said.

Among the listed businesses in this category are fish exporter Daya Guna Samudera, salt producer PT Fiskar Agung, PT Davomas Abadi, Tambang Timah, Aneka Tambang and Indosat.

She said around US$40 billion in funds were in the hands of foreign fund managers across Asia and Europe who were now waiting for the right time to enter Asian stock markets.

"Of these funds, a part will be invested in Indonesia, because the market is still attractive," she said.

She said that to accommodate more foreign investors in the Jakarta stock market, the JSX management had equipped itself with new facilities to ease trading activities in the market.

"We are going to start with scripless trading on the JSX beginning early next year," he said.

She said that when the scripless trading would be introduced, trading activities and trading frequencies were expected to increase.

"While other analysts are relatively pessimistic, I'm optimistic with our capital market," she said.

She said that the main price indicator on the JSX had declined sharply by around 40 percent, breaking the psychological barrier of 400-points on Nov. 21 last week to 391.25 points from its highest ever record of 740.83 points on July 7 this year.

Yesterday, the JSX Composite index closed slightly higher by 0.7 percent or 2.86 points to 398.53 points with a total turnover of around 416 million shares changing hands on the regular market valued at Rp 343.615 billion ($95.44 million).

Stock brokers said trading was relatively quiet since there were no fresh market incentives.

"I think trading activities are being driven by rumors rather than fundamentals," a stock broker with BZW Niaga Securities said.

She said the President's call last week for state companies to disburse one percent of their profits to buy stocks in the capital market affected psychological factors.

On Monday, the JSX composite index rose 18.95 points to 410.20 points from last week's close of 391.25. (aly)