Stocks expected to extend due to interest rate cut
Stocks expected to extend due to interest rate cut
JAKARTA (JP): Share prices on the local market are expected to
extend their gains this week in an euphoric market response to
the U.S. interest rate cut, stockbrokers and analyst have said.
Stock analysts said the rate cut, coupled with a strong
Japanese yen, would certainly ignite an investors' buying spree
on the local shattered market.
An institutional sales manager of Mashill Jaya Securities,
Antonio Yongnata, said on Sunday, "I think there will be some
persistent selective buying in certain stocks this week."
But stock analysts warned, however, that profit taking could
take place anytime of the week as some investors might cash in
profits made the previous days due to persistent concern over the
country's long-term economic prospects.
An analyst with a local securities firm said: "I don't think
the economic crisis in Indonesia has yet bottomed out. So,
investors might pull back to avoid losses at the end of the
week."
Stock analysts said that Thursday's 25 percentage basis points
of U.S. interest cut to 4.75 percent per annum spurred stock
prices on the local market on Friday, bringing the benchmark
price index to jump by 10.7 percent or 32.74 points to close the
week at 337.58.
Antonio said that several foreign brokerage firms, which made
large buying programs late last week, were expected to continue
purchasing blue chip stocks with good prospects on the local
market this week.
Stock analysts said the approval of the amendment to the
banking law by the House of Representative last week, which
allows foreign investors to control a 100 percent stake of a
domestic bank, would boost investors' buying appetite, especially
into banking stocks.
"I think this is another positive incentive for investors to
reenter the local market," another analyst said.
Bank Indonesia governor Sjahril Sabirin said last week that
foreign investors' ownership in local banks was no longer limited
because foreign investors' help was badly needed to recapitalize
the country's ailing banking system.
The Jakarta Stock Exchange (JSX) Composite Index rose sharply
by 10.74 percent to 337.58 points last week compared to 304.84
the previous week.
Total daily turnover, however, fell to 222.32 million shares
changing hands last week compared to 281.14 million shares the
previous week.
Total daily transaction values rose to Rp 261.48 billion
(US$31.7 million) last week compared to Rp 259.58 billion the
previous week.
Panin Sekuritas' head of research, Anton Karlam, said a
strengthening rupiah against the American dollar in the last two
weeks would certainly pose a buying impetus for investors to grab
undervalued stocks of corporation with huge foreign exchange
exposures.
"A strengthening rupiah will provide more leeway for local
corporations worst hit by the financial storm to have breathing
space to service their debt," he said.
Analysts have said that the U.S. interest rate cut also
brought the rupiah to close last week sharply higher, at 8,200
against the American dollar, significantly stronger than its
close at 9,050 the previous week.
But currency dealers said that although the rupiah had
gathered its pace against the American dollar, its fate would
partly depend on the movement of the Japanese yen against the
greenback in coming weeks.
A dealer with a local private bank said, "If the Japanese yen
continues to gain ground against the dollar, and most of us
believe it so, the rupiah would certainly follow suit, provided
there is no social unrest and the like happening at home."
The Japanese yen was traded higher at 115.40 against the
dollar in late New York trading on Friday after closing its Asian
trading at 116.15. The rising yen would provide comfort to other
Asian currencies riding on its back. (aly)