Stock prices on JSX expected to rise

JAKARTA (JP): Several stock analysts predict that stock prices on the Jakarta Stock Exchange (JSX) may increase slightly this week as foreign investors may continue their bargain hunting on selected blue chips.

The analysts, however, said that investors would be very cautious in making big transactions because of the concern about a possible rise in domestic interest rates.

"The central bank's move to raise commercial banks' minimum reserve requirement has intensified upward pressure on interest rates. The situation is obviously unfavorable for stock market performance," a senior analyst of a local securities company told The Jakarta Post over the weekend.

He argued that the raising of reserve requirement from 3 percent to 5 percent, to be effective next April, is a positive move in creating a strong banking system.

"It's also positive for businesspeople because it may reflect that our economy is now very strong," he said.

He said, however, that the move, which will further tighten the central bank's control over the banking system, is a positive maneuver for the economy in a long-term point of view.

"But in the short term, the policy will hurt our banking system. So, no wonder that most banking stocks reacted negatively in midweek," he said.

He said a recovery on several banking stocks over the weekend would not necessarily mean that investors had regained their confidence on those stocks but it was merely a technical rebound.

Governor of Bank Indonesia Soedrajad Djiwandono suggested last Friday that the increase of the reserve requirement should not make commercial banks raise interest rates.

Commenting on general market sentiment, the analyst, who declined to be named, said that foreign investors have become more positive on Indonesia but they still need more time to evaluate their position before deciding whether or not to bring in more fresh funds.

"They might prefer to wait for new issues like PT Daya Guna and particularly the state-owned Bank Negara Indonesia 46," he said.

A senior trader at the JSX, Nurkhamid Akhmad, said that buying interest from foreign fund managers is expected to continue this week.

"What was happening in the last two days was a strong signal for foreign investors' return to the market. And as usual, this move will be followed by local investors," Nurkhamid told the Post.

Nurkhamid, who is also a commissioner of the Surabaya Stock Exchange, predicted that local investors will further chase the shares of several companies which are currently preparing corporate action like the affiliates of the Gajah Tunggal Group and Kalbe Group.

Transactions

The return of foreign investors late last week boosted a 1 percent increase on JSX stock prices during the week.

The JSX Composite Index closed the week 5.2 points higher at 549.03.

Trading volume reached 619 million shares worth Rp 1.3 trillion (US$557 million) last week.

Foreign buy transactions amounted to Rp 755 billion as compared to sell transactions of Rp 771 billion.

Nurkhamid confirmed that most transactions done by local investors last week were driven by rumors or news on corporate actions. Those stocks buoyed by such rumors included Bhuwanatala, Mas Murni Indonesia, Intraco Pentha, Gajah Tunggal, BDNI and Steady Safe.

Bhuwanatala, the operator of the Bandung Indah Plaza shopping center, booked total transactions of Rp 26 billion during the week on a "buy back" rumor.

An internal restructuring in the Gajah Group boosted transactions of BDNI and Gajah Tunggal. The two companies booked total transactions of Rp 39 billion and Rp 32 billion respectively.

The "sleeping stock" of Intraco Penta recorded total transactions of Rp 35 billion with 22 million shares changing hands on the rumor that the company might have planned to issue rights shares.

Telkom was recorded as the most active stock with a turnover of 31 million shares worth Rp 103 billion.

Telkom's share price was unchanged at Rp 3,300 at last week's close, while Indosat rose by Rp 375 during the week to Rp 7,675.

Cigarette maker HM Sampoerna shares decreased by Rp 300 to Rp 22,200, while Gudang Garam rose by Rp 525 to Rp 9,200.

The top 10 stocks in terms of value, other than Telkom, Medco, BDNI and Intraco Penta, were Medco Energy Corporation (with a trading value of 79 billion), Astra International (Rp 65 billion), HM Sampoerna (Rp 51 billion), Steady Safe (Rp 46 billion), BII (Rp 41 billion), Lippo Life (Rp 38 billion) and Semen Gresik (Rp 37 billion). (alo)