Stocks jump on stable political situation
JAKARTA (JP): Stock prices on the Jakarta Stock Exchange (JSX) rose for a second consecutive day yesterday, with the main price index gaining 4.4 percent at the close of trading.
Stockbrokers said foreign and local investors were upbeat with the stable political and social situation during the General Session of the People's Consultative Assembly to elect a president and vice president.
"Stock trading is active as the market feels secure with the stable political and social situation during the General Session," said Surya Martara, head of sales at UBS Securities.
He said worries over political and social instability had faded due to the absence of any major social or political protests during the ongoing Assembly meeting.
Foreign brokerage houses were mixed during yesterday's trading as some of them, including Jardine Fleming Nusantara, Merrill Lynch and Credit Lyonnais, were net sellers while other foreign houses like Indosuez WI-Carr and OSBC Securities were net buyers, he said.
Brokers also said most foreign investors made large purchases of tobacco stocks like Gudang Garam and HM Sampoerna on market talks that the cigarette makers would increase their retail prices to pair the government plan to reduce its excise tax.
Gudang Garam's stock price rose Rp 1,375 to Rp 13,725 on a total volume of 5.48 million shares, while HM Sampoerna rose Rp 900 to Rp 6,625 on a total volume of 7.09 million.
Stockbrokers also said massive buying by foreign investors on overseas listed companies like PT Telkom, Indosat and Tambang Timah helped revive stock trading in the local market, pointing to arbitrage trading in these stocks which would benefit from domestic and foreign price differentials.
Telkom's shares rose Rp 250 to Rp 4,000 on a total volume of 12.78 million, while Tambang Timah rose Rp 425 to Rp 7,875 on a total volume of 1.03 million and Indosat climbed Rp 675 to Rp 13,475 on 551,500 shares.
The JSX Composite Index closed 21.95 points higher at 518.686 from 496.72 points the previous day.
About 922.26 millions shares changed hands on the regular market valued at Rp 1.07 trillion (US$120.22 million).
Stock analysts said yesterday the upbeat sentiment in the local market could partly be attributed to market speculation that the government's "IMF-Plus" program would gain support from international and domestic investors.
"I think the local market perceived that the President's accountability speech on Sunday showed a clear direction of how the government will deal with the current economic turmoil," an analyst with a local securities firm said.
The analyst said the market perceived that President Soeharto's "IMF-Plus" program, which he announced in his accountability address Sunday, would include large-scale privatization of state-owned companies, a bankruptcy law, reduction and rescheduling of external debt and the adoption of a currency board system to fix the rupiah at a set rate against a foreign currency.
As stock prices rose, the rupiah remained relatively stable in the currency market closing at 8,950 against the U.S. dollar, compared to its opening of 8,750/8,800 in the morning session.
Dealers said trade of the rupiah, which closed at 8,850 to the dollar the previous day, remained thin as most operators moved to the sidelines to wait for the conclusion of the General Session.
"I think the rupiah will likely remain below the 10,000 level until the end of the meeting," a chief dealer with a local private bank said. (aly)