Jakarta price index may pass 3,000 mark, analysts say

A rally in share prices on the Indonesian Stock Exchange continued on Tuesday with the main price index rising 1.2 percent on the back of foreign purchases.
The Composite Price Index rose 1.9 percent on Monday and booked another significant gain on Tuesday to close 1.6 percent higher at 2,657.17, the highest level since Jan. 20.
Analysts are upbeat that with the improvement in the country’s economic indicators in recent months, the bullish sentiment in the stock market would continue.
Swiss-based fund management company UBS estimates that the price index would reach 3,025 by the end of this year on the back of the surge in prices of shares covering property, mining, banking, cement and infrastructure.


Joshua Tanja, analyst at UBS estimated listed companies would score an average 22 percent increase in earnings this year, after booking between an 11 and 12 percent increase in 2009.
“Indonesia is going to do well this year,” Joshua told reporters.
Overseas investors on Monday bought a net Rp 541 billion (US$58.97 million) of shares, paring the outflows from the equities to Rp 218 billion this year, according to the Indonesia Stock Exchange.
The Indonesian stock market was one of the best performing exchanges in Asia last year, with the main index rising by more than 65 percent to close at  2,534.36.
Joshua said stock market growth would also depend on the central bank’s moves. “If Bank Indonesia [BI] is quite credible in its monetary policies, equity market will perform positively,” he said.
He said several risk factors that might affect the market performance this year included the macroeconomic environment, rupiah volatility, government regulations and sector specific risks.
UBS currency strategist Nizam Idris forecast the rupiah would weaken to 9,400 per dollar by the end of this year, and strengthen again to 9,200 by the end of 2011. On Tuesday, rupiah fell 0.2 percent to Rp 9,205 per dollar.
“[We see] in the second half the global economy will hit a slowdown. But these three — the rupiah, the Indian rupee and the Chinese yuan — are not exposed to the global economy,” he said.
Idris said the determining factor on rupiah depreciation would be inflation. “If inflation is not controlled, we will see the currency weakening again,” he said.
BI has kept its benchmark interest rate at 6.5 percent for the seventh straight month to boost growth. Inflation rose 3.81 percent in February from a year earlier, the Central Statistics Agency said.
UBS economist Edward Teather said BI might start raising its rate in the third quarter this year by a total 150 basis points. He estimated Indonesia’s economy would expand 6 percent in 2010 and 2011.

thejakartapost.com / Wed, 03/10/201