Weekly Outlook Nov26, 2007

26 11 2007

Weekly Outlook : Stocks may arrest their falls this week boosted by the rebound on Wall Street and the upbeat sentiment on regional markets. Moreover, the bad news on Temasek may also be overdone, since the ruling is company specific and should have a minimal impact on listed companies overall. And the historical tendency for stocks to do well in December should also not be disregarded. As such, the market may recover somewhat this week with the JCI heading toward the 2,630-2,650 level.

Stocks listed on the JSX extended their losses last week after the Indonesian anti-monopoly watchdog ruled against Temasek. The decision led to widespread selling as market players fear that foreign investors may be much more cautious now in their investment plans. Other market negatives were the persistently high crude oil prices that raise concerns over weaker corporate profits growth – fuel supplied to industrial customers in Indonesia is not subsidized – and lingering worries over the US economy outlook. Over the week, the JCI lost 99.19 points or 3.7 percent to 2,569.51.

In the last six years, Jakarta stocks have risen in every December: by 5.0% in 2006, by 6.8% in 2005, 2.4% in 2004, 12.0% in 2003, 8.8% in 2002 and 3.1% in 2001. But the market has been in a bullish trend in these years of course. Indeed, the JCI showed an average monthly return of 4.6% in 2006, 1.4% in 2005, 3.7% in 2004, 5.2% in 2003, 0.67% in 2002, and a negative 0.5% in 2001.

In a highly controversial ruling, Indonesia’s anti-monopoly watchdog, the KPPU, stated last week that the Singapore government holding company Temasek had breached Indonesian competition rules by holding stakes, albeit indirectly, in two of the nation’s largest mobile telecoms firms, Telkomsel and Indosat. This has resulted in consumers being overcharged and excessive profits for the two mobile telecoms firms, claimed the KPPU.

As punishment, the KPPU has ordered Temasek and its telecommunication units to pay fines of Rp25 billion each. But more significantly Temasek will also have to divest shares in one of the two companies within two years. However, any interested buyers will not be allowed to acquire more than 5 percent of the total shares on sale and must not have any affiliation with Temasek or other buyers. This will thwart the intentions of any big players seeking to gain a foothold in Indonesia’s potentially lucrative mobile telecoms industry. Weekly Market Commentary Nov26, 2007


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