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.