Stock market still in recovery mood: Analyst

Stock market still in recovery mood: Analyst

A'an Suryana, The Jakarta Post, Jakarta

The local stock market is likely to continue its recovery from
the Oct. 12 terrorist attack in Bali, with low share prices and a
new antiterrorism decree likely to improve market sentiment this
week, an analyst said.

Climbing from a four-year low in the first week of trading
after the Oct. 12 bombings, the Jakarta Stock Exchange (JSX)
Composite Index ended last week up 23.43 points at 360.90.

Senior analyst at Sigma Research Institute, Jasso Winarto,
said investors oversold shares during panic selling immediately
after the Bali bombings.

Nearly 200 people died when a massive car bomb exploded
outside of a Kuta nightclub packed with foreign vacationers. It
was the worst terrorist strike this country has ever seen, and
the biggest act of terrorism since Sept. 11, 2001.

"Selling pressure drove share prices to their bottom," said
Jasso over the weekend.

The Monday after the attack saw shares plunge to 337.47, down
9 percent from the previous week's close and on par with levels
last seen in April 1998 when the economy was in a full blown
crisis and the nation was heading for the first change of
leadership in more than 30 years.

"Needless to say, the low index was bound for recovery," said
Jasso, referring to a technical rebound when investors snap up
shares that have fallen below prices that reflect their true
value.

According to him, the market would continue its recovery this
week and this trend would receive a boost from positive domestic
news.

The government issue last Friday two antiterrorism
regulations, signaling to the market that it is serious in
dealing with the terrorism threat. Armed with the regulations,
authorities will have more leeway in arresting terrorist
suspects.

Also, police arrested on Saturday Abu Bakar Ba'asyir, who
Western countries accuse of links to al-Qaeda, a group associated
with the Sept. 11, 2001, terrorist attacks on the United States.

"The determination to combat terrorism is improving market
sentiment," Jasso said.

Outside, world markets rallying after months of a bearish mood
will also add to the overall positive sentiment. The Dow Jones
and Nasdaq were up 5.6 percent and 4.7 percent respectively in
last week's trading.

U.S. investors shrugged off fears of more terrorist strikes as
major firms reported positive earnings.

Improvements in market sentiment could lend the JSX Index
another 3 percent rise, Jasso estimated.

In the currency market the rupiah's outlook is stable.

Selling pressure is likely to remain amid continued corporate
demand for the dollar to repay foreign debts. However, the
government's new tougher stance on terrorism should dampen the
need to hedge for more slides in the rupiah.

Bank Indonesia has signaled further intervention this week to
stem the rupiah's fall, adding that the pressure on the currency
is temporary.

"Bank Indonesia intervention, combined with a tougher handling
of terrorism here could help the rupiah stabilize at 9,200
against the US dollar this week," said Wiwan Wiradjaja, a
currency analyst.

The local unit closed last week at 9,210 to the dollar.

According to Wiwan, speculators unloaded rupiah following the
bomb blasts but retreated after Bank Indonesia stepped in to aid
the currency.