Stock market set for more gains, analyst says
The Jakarta Post, Jakarta
The local stock index may be heading this week for another cautious climb on the coattails of a rise in regional markets, said one analyst, adding progress in the Bali bombing investigation was cementing the market's bullish outlook.
The Jakarta Stock Exchange (JSX) Composite Index's turnaround last week could signal the direction over the coming weeks, said stock analyst Hengky Sumarli of Kim Eng Securities.
"This may be just the beginning, the overall trend is upwards with some minor corrections along the way," he said on Friday.
Last week stock trading saw the JSX index end higher at 373.23 compared to 370 during the previous week's closing.
The rise came on the back of rallying shares in Asian markets.
A 41-year low in U.S. Federal Reserve key rates, after a half a point cut in early November, buoyed Wall Street and triggered the Asian gains, according to Hengky.
"The prediction is that the Dow will again go above 9,000, so the local market is counting on this outlook," he said, referring to the Dow Jones Industrial average, which tracks the New York market's blue chip shares.
American investors have taken a bullish stance over the past few weeks since the Fed rate cuts and on signs that the U.S. economy, the World's largest, is on track for a recovery.
"Because global markets are improving, we're seeing a return of foreign flows into the local market," he said.
On the domestic front, a slew of third quarter corporate earnings have added to local players' buying mood, Hengky said.
Underpinning foreign investors' cautious reentrance is the steady progress in the Bali bombing investigation.
Police last Thursday nabbed Imam Samudra whom they believe is a key player in the Oct. 12 bomb explosion that has left nearly 200, mostly foreign tourists, dead.
This followed the arrest of Amrozi, another suspect, who has confessed to helping assemble the bomb. Police spokesmen said they were hot on the trail of the remaining eight suspects.
While frequent security problems remain a deterrent to investors, the relatively stable political outlook has allowed for some improvement on the country's overall investment climate.
The JSX index fell to its lowest point in four years in the first trading day after the bombing, and Hengky said the low base from which the market was recovering meant that more gains were in the offing in the coming weeks.
"The thing is that the Indonesian market is lagging behind its regional peers who began recovering much earlier," he said.
Expected drops in share prices as investors take profit on previous gains would unlikely break the upward trend, he added.
On the currency market, the rupiah made a surprising run into the 8,000 territory relative to the U.S. dollar last Monday, but fell back to around 9,000 by Friday.
"Corporate demand for the dollar strengthened over the week," said currency analyst Wiwan Wiradjaja at PT DBS Vickers.
News of Malaysian investor Commerce Asset Berhad converting its dollars for Rp 1.05 trillion worth of government stakes in Bank Niaga buoyed the rupiah, albeit not much.
Wiwan said the Indonesian Bank Restructuring Agency (IBRA) was seen active in the market, while Bank Indonesia appeared to have retreated.
"Both institutions normally coordinate, since one is enough to step in," he said. IBRA, which is in charge of selling state assets, converts dollar proceeds to make rupiah payments to the state coffers. The agency occasionally helps the central bank bolster the rupiah with its dollar selling.
For this week, Wiwan estimated that the rupiah would hover at between 9,000 to 9,100 and corporate demand would drive the market.