Stocks expected to rebound this week: Analyst
The Jakarta Post, Jakarta
After losing almost 2 percent last week, the Jakarta stock composite index should rebound this week as fears of violent street protests over the recent fuel and utility price hikes were expected to subside after the government announced a fiscal stimulus package to help minimize the impact on both the public and business, according to an analyst.
Jasso Winarto of the Sigma Research Institute told The Jakarta Post on Sunday that the index would eclipse the 400 point level on the back of a rebound in blue chips.
"Last week's trading means that the index has declined almost 6 percent since the beginning of 2003. Most of our top share performers are already undervalued because of that.
"I'm upbeat that the index will rebound this week, back to above the 400 level," Jasso said.
The index ended last week at 399.67, down 7.85 points, or close to 2 percent, from the previous week's close.
He added that investors were not be so worried now about street demonstrations as they had been violence-free so far.
A simultaneous increase in public utility charges and fuel prices met with strong opposition from various elements in society, including students, workers, businessmen and politicians.
Thousands have been taking to the streets demanding that the government cancel the hikes, saying they would only increase the suffering of the people and the business community amid the current economic difficulties.
Early this month, the government raised fuel prices by up to 22 percent as part of an effort to reduce costly fuel subsidies, thus containing the 2003 state budget deficit to manageable levels. These increases followed a 6 percent and 15 percent increase in average electricity and telephone charges respectively.
However, weathering the storm of protest, the government moved quickly to provide a fiscal stimulus package in the form of tax incentives to help ease the pain caused by the hikes.
A total of 45 tax cuts were announced by the government in the hope of lessening the impact of the price increases as well as spurring business activity in the country.
"The market views this positively" Jasso said.
Last week's daily trading volume averaged 242.5 million shares valued at Rp 274.17 billion (US$30.4 million) compared to 180.5 million shares worth Rp 202.5 billion the previous week.
Turning to the currency market, the rupiah was expected to remain stable against the U.S. dollar this week on continued support from Bank Indonesia, an analyst said.
"Just as in the previous week, the performance of the rupiah this week will continue to be closely watched by the central bank so as to counter possible rupiah turbulence resulting from the protests against the utility price hikes," Panji Irawan, a currency analyst with Bank Mandiri, told the Post on Sunday.
And taking into account the fact that the demonstrations have been peaceful so far, the fears of a worst-case scenario are now gradually fading, Panji added.
"So, the volatility and fluctuations of the rupiah this week will remain within a narrow range, no more than Rp 50."
Last week, the local unit closed at 8,918 per dollar, not far away from the previous week's close of 8,920.