Stock, rupiah to remain at mercy of regional issues

Stock, rupiah to remain at mercy of regional issues

Rendi A. Witular, The Jakarta Post, Jakarta

The course of the Jakarta stock market this week would depend
mainly on sentiment in regional bourses rather than concerns over
domestic political and security conditions, said a securities
expert.

Stock analyst Hendra Bujang of Mega Access Securities said the
local stock market had made gains in the last three trading
sessions mainly due to a rebound in regional markets.

"The index will remain at the mercy of regional sentiment,
because foreign investors make up about 50 percent of our daily
transactions, making the bourse more vulnerable to any global
issues," Hendra said on Sunday.

However, he said sentiment in regional markets were generally
weak, overshadowed by lingering negative issues including a
possible hike in the U.S. interest rate, economic slowdown in
China and surging oil prices. These factors, plus local political
issues in some markets, had sent global markets plunging during
the early part of last week and in previous weeks, also sending
the local stock market on a roller coaster ride.

"The chance is 50-50 for the bourse this week to surge higher.
I expect the index movement to go for a long range of between 700
and 750 this week," he said.

The local index closed slightly higher on Friday at 724.932,
up by 2.223 points compared to the previous Friday.

The average daily volume was 1.58 billion shares worth Rp 1.17
trillion (US$129 million), compared with 1.93 billion at worth Rp
1.12 trillion the previous week.

Regarding political and security concerns over the upcoming
July 5 presidential election, Hendra said this would not
significantly affect the index, unless an extraordinary incident
such as riots, clashes or terrorist attacks occurred.

Elsewhere, an analyst with a state-owned securities firm said
a regional issue that could help lift the index was a Saudi
Arabia proposal to raise its oil output to help stabilize oil
prices, which surged last week to a record level of more than $41
per barrel.

Saudi Arabia, OPEC's largest producer, has proposed to raise
its output by more than 2 million barrels per day (bpd), or 8.5
percent above its existing limits of 23.5 million bpd.

However, OPEC has yet to approve the plan, and is expected to
come up with the consent during the cartel's official meeting in
Amsterdam on June 3.

Saudi Arabia has submitted its proposal to the Organization of
the Petroleum Exporting Countries (OPEC).

"Concerns over the U.S. interest rate hike plan will slightly
subside this week, as it has not materialized yet. Oil price
issues will probably rule the regional sentiment this week," said
the analyst.

Analysts have expressed concern that the soaring oil price
will increase production costs of companies and thus push
inflation higher, which would threaten the country's hard-gained
macroeconomic stability.

Meanwhile, the rupiah is projected to remain hovering at
around Rp 9,000 against the dollar this week on expected profit-
taking by speculators.

The rupiah closed slightly lower on Friday at Rp 9,065,
against Rp 9,040 the previous Friday.

Bank Indonesia has hinted that rupiah woes may last longer due
to global uncertainties, but remained confident the unit would
eventually stabilize, as economic fundamentals remained strong.