Stocks surge 7.2% on Wall Street's rally
JAKARTA (JP): Share prices in the local stock market rallied for a third consecutive day on Thursday, rising 7.2 percent due to a persistent inflow of fresh offshore funds, stockbrokers and analysts said.
However, the beleaguered rupiah remained stagnant, closing unchanged at 7,950 against the U.S. dollar in very thin trading despite a general strengthening of regional currencies, dealers said.
Stockbrokers said that regional equity markets responded bullishly to a 2.5 percent rise in Wall Street on Wednesday. The sentiment spread to the local market, which experienced a buying spree on Thursday.
"Bullish sentiment in the regional equity markets extended to the hammered local bourse," Vonny Juwono, an institutional sales broker with Trimegah Securindolestari, said.
The Jakarta Stock Exchange (JSX) Composite Index rose 30.86 points to 457.94 -- off an intraday high of 462.12 -- on a total turnover of 577.77 million shares worth Rp 840.83 billion (US$107.52 million) on Thursday.
Thursday's main index price was the highest it has reached since Aug. 4 last year.
Advancers outnumbered decliners 77 to 37 with 70 stocks remaining unchanged.
Mashill Jaya Securities' sales manager Antonio Yongnata said the rally in the local bourse would not be sustainable because it was fueled largely by a sharp rally in other markets.
"The short-term buying spree does not reflect the recovery of confidence by foreign investors in the local market," he said.
Securities analysts said that the fundamentals of the country's financial market in the medium-term and long-term remained gloomy because political upheaval ahead of the general election in June and the presidential election in November could drag down the local market.
"This rally is only temporary. It is not supported by strong fundamentals," BNI Securities' research director Adrian Rusmana said.
He said offshore fund managers, who had fled the country during the worse financial and political crises to hit the country in three decades, were not tempted to invest a significant portion of their funds in the local bourse.
"Right now, it is still out of the question to expect long- term foreign capital entering the market," he said.
Trimegah's Vonny said, however, that certain foreign brokerage firms, which had been absent from the local market in the past few months, had invested a significant amount of short-term funds in the local bourse on Thursday, with blue chip stocks their main targets.
She said that Credit Lyonnais, ING Barings Securities, Jardine Fleming Nusantara and HSBC Securities placed large buy orders on PT Indah Kiat Pulp & Paper, state-owned telecommunications firm PT Telkom and cigarette maker PT HM Sampoerna.
The share prices of Indah Kiat rose Rp 425 to Rp 2,700 with 39.97 million share being traded; PT Telkom climbed Rp 425 to Rp 3,725 on 44.10 million shares and HM Sampoerna jumped by Rp 675 to Rp 7,000 with 16.13 million shares changing hands.
Brokers and analysts, however, said Thursday's rally would not extend into the coming days because profit taking ahead of the Muslim's Idul Fitri holiday would weigh down market sentiment.
"This buying spree will not last when investors begin profit taking," Mashill's Antonio said.
Unlike the stock market, the rupiah closed unchanged at 7,950 on Thursday as participants found no fresh leads to entice them into the market.
Currency dealers said most operators shunned the country's currency market because of massive problems hanging over the local banking system. They were also worried about the increasing risks of holding the rupiah.
"Trading volume remained thin as market participants were still worried by the country's political developments," a chief dealer with a local bank said.
Dealers said that trading on the rupiah was thin, ranging between 7,900 and 7,950 to the dollar on Thursday.
"The rupiah will remain in that vicinity in the coming days because we do not expect to hear any good news that would attract investors to the rupiah," another dealer said. (aly)