Stock market price rally may continue this week

JAKARTA (JP): The price rally on the local market is expected to continue this week as a result of newfound investor confidence in the country's economy, according to analysts.

Analysts said that bullish sentiment over the weekend was expected to lure more investors back into the fray.

The upsurge of the Jakarta Stock Exchange (JSX) Composite Index, which on Friday breached the psychologically important 400 level for the first time in two months, has given rise to hopes of a recovery in the country's capital market.

"I think many investors will take advantage of the bullish situation by placing more buying orders even though profit-taking will also be seen on some blue chip shares," one analyst said.

The market's main price index recorded an all time high of 740.38 on July 8, 1997. Shortly thereafter the financial crisis hit the country, marking the beginning of a steady decline in share prices, with the main price index plunging to as low as 290.91 on Sept. 17, 1998.

"Although we were a bit surprised to see a sharp increase in stock prices on Friday, we still expect more buying programs this week," Vonny Juwono, an institutional broker with Trimegah Securindolestari said.

Stock prices in the local market rose 6.4 percent higher on Friday, breaking through the key 400 level for the first time in two months to hit 403.65. The rise was attributed to bullish sentiment in the regional equity markets and relative calm on the domestic political front.

Vonny warned that the buying mood would not last for the whole week, pointing out that some investors would take profits on the recent gains they have made.

"Share prices will rise in the early part of the week but will decline toward the end of the week due to profit taking," she said. But she was optimistic that the price index would stay above the 400 level.

However, most securities analysts expressed fears that continued anti-government demonstrations could prevent recovery in the capital market, particularly if they turn violent.

"The impact of such an incident on the market could be worse than it was before," one analyst said.

Adrian Rusmana, the head of research at BNI Securities, said he believed that if anti-government pass of peacefully, they would be of little consequence to the market.

"This shows that investors are no longer heavily influenced by the political situation," another analyst said.

Other analysts said that the presence of positive leads such as the downward movement of interest rates would also have a positive impact on the market.

The rupiah is also expected to remain steady against the U.S. dollar in trading next week, with some analysts saying that a further rise is not beyond the realms of possibility.

"If student protests do not turn violent, the rupiah could possibly rise to 7,000," a chief dealer with a joint venture bank said.

The rupiah closed at 7,500 against the U.S. dollar last week compared to 7,850 in the previous week.

The Jakarta Stock Exchange (JSX) composite index rose 13.5 percent (48.11 points) to 403.65 last week compared to 355.54 at the previous week's close of trade.

However daily average turnover declined to 380 million shares last week compared to 409.05 million shares in the previous week.

Daily average transaction value declined to Rp 346.32 billion last week from Rp 438.79 billion in the previous week. (aly)