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.