Stocks may continue rally ahead of election
Stocks may continue rally ahead of election
The Jakarta Post, Jakarta
The rally in the stock market is expected to continue this
week as investors become increasingly confident the presidential
election will go off without a hitch following a peaceful
campaign.
Stock analyst Arwani Pranadjaya of Mandiri Securities
predicted there would be heavy buying in the market after recent
losses.
"As confidence grows, investors will snap up selected blue-
chip shares that are mostly undervalued following recent losses.
The shares are still considered cheap and investors won't want to
miss this opportunity," said Arwani over the weekend.
He said investors would likely go for selected blue chips that
were still considered undervalued, such as PT Astra International
and Bank Central Asia, the country's largest privately owned bank
in terms of assets.
Investors are also expected to grab up shares of mining
companies following increases in the prices of commodities such
as tin, nickel and oil, he said.
The Jakarta Composite Index ended higher on Friday by 4
percent, closing at 720.232 from 692.715 the previous week.
Average daily volume was 934.82 million shares valued at Rp 528
billion (US$56 million), compared to 788.68 million shares worth
Rp 501.2 billion the previous week.
The index, along with other regional bourses, has been under
pressure recently because of the U.S. plan to raise interest
rates, China's move to cool off its overheated economy and
soaring oil prices.
Arwani said all of this bad news had been absorbed by the
market, knocking down the value of most blue-chip stocks, leaving
room for investors to snap up the shares at lower prices.
However, any stock rally could be dampened by fluctuations in
the rupiah, which would trigger more uncertainty for investors,
he said.
"It was the stable rupiah that caused the rally in the bourse
last week. If the rupiah stays below Rp 9,400 against the U.S.
dollar this week, we may expect the index to continue its rally
in a range of between 720 and 733," he said.
The stock index rose significantly during the last two
presidential elections. During the election in 1997, the index
reached a new high of 689.498 points. And in 1999, the index also
rallied to close higher at 686.947.
Indonesia will hold its first direct presidential election on
July 5. If necessary, a runoff will take place on Sept. 20.
Elsewhere, a currency dealer with a state bank said the rupiah
was expected to remain flat at about Rp 9,400 against the U.S.
dollar this week, in response to possible limited demand for the
dollar by the corporate sector.
"Companies already bought dollars over the past couple of
weeks. I expect such buying will be limited this week. However,
we should remain cautious toward speculators following a possible
hike in U.S. interest rates," said the dealer.
The U.S. Federal Reserve is scheduled to meet this week and
could decide on a rate hike plan.