Market sentiment is likely to remain upbeat on the JSX this week and the JCI should move higher. A break above 2,000 is not out of the question. Overall newsflow is largely positive and hopes of stronger investment growth should encourage investors. Upbeat regional markets and a bullish Wall Street are providing another pillar for the market’s strength. Liquidity is also strong. Meanwhile, on the domestic political front, news of an impending cabinet reshuffle may just be enough to reverse the growing consumer pessimism in the government.
Jakarta stocks extend their gains. Stocks listed on the JSX remained on their upward trajectory last week, with the JCI ending the week up 27.578 points at a record closing high of 1,968.73. Among the sectors, banking stocks continued to show their strength as lower interest rates are expected to lead to a conducive business environment for banks and stronger profitability going forward. Deposit rates at some major banks have now been slashed to below 7%. A minor setback was seen on Thursday as profit takers emerged on a regional correction after news of breakneck economic growth in China of 11.1% percent in 1Q07 suggested that that country’s economy was overheating. But such fears were quickly vanquished and stocks on the JSX rebounded strongly on Friday as regional markets recovered. Average daily trading value reached Rp3.8 trillion, again showing strong appetite for stocks, while foreign buying on the JSX reached Rp736.01 billion over the week.
US stocks retain their upward momentum. Strong corporate results continued to boost market sentiment in the US. Last week it was the turn of Honeywell International Inc., Caterpillar Inc. and JPMorgan Chase & Co. to come up with better-than-expected first quarter results. At the same time, economic data that suggested inflation was being well contained added to the positive sentiment: interest rate cuts a more likely prospect than before later in the year. Against this backdrop, all major stock market indices gained ground over the week. The DJIA added 2.8 percent to 12,961.98, while the broader Standard & Poor’s 500 Index rose 2.2 percent to 1484.35. The tech heavy Nasdaq Composite Index climbed 2.2 percent to 2526.39, its highest level since February 2001.
Sentiment on the JSX should remain positive this week. Market sentiment is likely to remain upbeat on the JSX this week and the JCI should move higher. A break above 2,000 is not out of the question. Overall newsflow is largely positive and hopes of stronger investment growth should encourage investors. Recent data confirms this to be the case with realized foreign direct investment (FDI) in Q1 2007 up 15 percent y-o-y. And looking forward, some large projects seem set to get off the ground. Upbeat regional markets and a bullish Wall Street are providing another pillar for the market’s strength. Liquidity is also strong and demand for equities is high. Of interest is that foreign investors are continuing to pour money into hedge funds, some of which seek to explore the opportunities available in emerging markets – particularly in Asia – given the region’s strong economic growth prospects. China is leading the way, as Asian countries’ trade dependency with the US declines. And in Indonesia’s case, it is able to leverage on its strengths as a country rich in natural resources at a time of buoyant commodity prices coupled with the brisk regional growth. A potent mix indeed. Download the full report.