Stock may rally on peaceful election

Stock may rally on peaceful election

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index is projected to rebound this week
as investors gain confidence over the country's future political
and security conditions, following a largely peaceful general
election on Monday.

Stock analyst Hendra Bujang of PT Mega Akses Securities said
the peaceful election would prop the Index up higher this week
after it suffered a 4 percent decline at the start of the
electoral campaign on March 11 over fears of violence.

"Confidence from foreign investors over the country's
stability will help the Index to experience a technical rebound
this week, testing the level at between 770 and 780," said
Hendra.

He explained that most of the foreign investors, who became
the main drivers of the country's bourse, had reduced their
investments during the electoral campaign period for fear that
political and security instability would follow.

Hendra and several other analysts believe that foreign
investors made up around 70 percent to 80 percent of investment
in the stock market, making the bourse vulnerable to the
slightest change in the country's security and political
situation.

However, this optimism would be overshadowed by further fears
of security problems during the upcoming presidential election,
Hendra said.

The presidential election is slated for July 5, with a
possible runoff on Sept. 5.

The Index closed last week at 750.652, up 36.523 points or 5.1
percent from the previous week. The average daily volume was 1.27
billion shares worth Rp 779.55 billion (US$90.9 million) compared
to 1.38 billion, worth Rp 707.3 billion the previous week.

The market was closed for the election on Monday.

Despite its limited direct impact on the country's overall
economy, the rally of the index should be a measure to gauge
investor confidence in the country's economy.

As for companies, the stable and high index figure could be an
effective source of funding and working capital, because they can
receive higher proceeds when selling their shares on the market
during the rally.

President of state-controlled Bank Negara Indonesia (BNI)
Sigit Pramono told The Jakarta Post recently that the bank had
projected a boom in the country's economy following a peaceful
election.

He projected that new companies would emerge and the existing
companies would race to expand their businesses after the
election, paving the way for the real sector to drive the
economy.

"There will be aggressive business expansions and start-ups if
the election proceeds peacefully. More capital from banks and the
stock market will be needed and more workers will be absorbed,"
said Sigit.

Sigit said that banks would face tougher competition in
channeling their loans, as there would be an increased demand for
loans from both the corporate and the consumer sectors.

The tougher competition would prompt banks to lower their
lending interest and simplify procedures to net more customers,
he said.

BNI, the country's second largest lender in terms of assets,
has extended its new lending this year to around Rp 16 trillion,
or 86 percent higher than loans it channeled in 2002, in a bid to
anticipate the boom.