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.