Upward trend in price of shares to continue

Upward trend in price of shares to continue

JAKARTA (JP): The upward trend in the price of shares on the
local stock market will likely continue this week following
reports on the improvement of the country's economic
fundamentals, securities analysts said.

"We are fundamentally stronger now, with a more stable
inflation and improved production activities," said an analyst at
a local brokerage house.

But, he said, concerns over the country's environment of high
interest rates and the still fragile political conditions would
continue to affect the buying mood.

"The Jakarta Stock Exchange (JSX) Composite Index will still
be able to maintain its upward movement but the gains will be
limited as cautions remain," he said.

The Central Bureau of Statistics (BPS) issued on Friday an
encouraging report on the country's economic indicators, with a
lower inflation rate showing a downward trend.

Exports and imports also showed significant growth in the
period January to May, reflecting an improvement in the country's
economy.

The JSX Composite Index, which fell below the 450 level early
in June and stayed below 500 for quite some time, showed an
encouraging performance last month and gained about 16 percent
from a month earlier.

The index rose another 2.4 percent last week to close at
515.11 points, compared to 503.14 the previous week.

Another analyst from a foreign brokerage house agreed that the
Composite Index still saw an upside this week, saying "The market
continues to recover, but slowly."

Posing suspicions about the recent market development, equity
analyst Dandossi Matram speculated there had been invisible hands
serving to support the Composite Index from falling.

There is the question of how the Composite Index has managed
to rise by 16 percent within the past month, despite higher
interest rates, the heating up of the political condition and
sluggish regional markets, said Dandossi.

"Don't ask me for a logical explanation for it, but the
Composite Index did rise last week and is expected to rise
further next week," he said over the weekend.

The Composite Index rose by 16 percent from 444.44 points on
the first trading day of June to 515.11 points on the last day of
the same month.

Meanwhile, the central bank last week allowed the benchmark
interest rate on its one-month SBI promissory notes to increase
from 11.74 percent to 12.33 percent, the highest level since the
end of last year.

Dandossi surmised the upward movement of the Composite Index
was merely political, adding that there were some interest groups
who would like to prop up share prices ahead of the August
preliminary meeting.

"It is sometimes forgotten that political battles exist on the
JSX floor, like during the Soeharto regime, the Habibie
transitionary period and now with the current administration," he
said.

In August, president Abdurrahman Wahid is scheduled to deliver
his accountability speech before the Consultative Assembly's
members, in which he has to explain his economic performance as
well as his controversial decision to abruptly expel two of his
Cabinet members from strong opposition parties in March.

Dandossi said there was at least a month of consistent buying
through a particular foreign broker, despite the fact that there
had not been any positive news in the country.

The buy recommendation will probably be visible during the
period ahead of August, but investors ought to be careful,
according to Dandossi.

"It's like having a buffer for our stocks, holding them so
they won't go down too much. But the danger of artificial
Composite Index levels is always there," Dandossi said.

In contrast to the occurrences at the JSX, the rupiah lost
ground last week, despite a rise in the central bank's interest
rates.

Dealers said concerns over what might occur in August is
greater than the effect of interest rate hikes. They also said
the rupiah this week would be in the narrow range of 8,650 and
8,800.

"The weakening of the rupiah last week, despite the interest
rate hike, was a clear sign that concerns about political events
in August is there," said a dealer.

The rupiah lost about one percent of its value last week to
close at Rp 8,765 against the U.S. dollar, compared to Rp 8,685
the previous week. (udi)