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Indonesia's stock market will remain a shining star for
investors this year despite the decline in the stock index since the
start of 2007, analysts from ABN Amro say, with the main index expected
to return to the 1,800 level over the course of the next twelve months.
Investment advisor Peter Harsono said the return to a bull market would
be based on higher spending, lower inflation and interest rates, and
the government's plans to spend more on infrastructure development this
year.
All this would improve the prospects of companies in the banking,
construction, property, automotive and retail sectors,
Peter said during a market outlook event for the media Tuesday.
The Jakarta Stock Exchange Composite Index closed down 7.102 -- or 0.4
percent -- at 1,727.360 Tuesday, marking the bourse's fourth straight
daily loss on the back of negative sentiment following the recent
floods in the national capital.
Automaker Astra International, retailer Ramayana, state gas utility PGN
and state telecommunications firm Telkom led the decliners, while
miners Timah and Inco, and cement-maker Semen Gresik bucked the trend.
Trading volume was 1.66 billion shares worth Rp 1.85 trillion (US$203
million).
The rupiah, meanwhile, was trading at Rp 9,072 to the U.S. dollar,
compared to Rp 9,041 the previous day.
ABN Amro had predicted that its optimistic outlook on Indonesia's stock
market could come at a price, warning of possible negative sentiment
that could well rattle share prices.
"It's just like a party. There's always the hangover afterwards,"
global chief economist Han de Jong said of the present situation on the
world markets, including emerging markets like Indonesia.
He said that stock markets the world over were now the playgrounds of
leveraged -- or overborrowed -- investors buying the stocks of equally
leveraged companies, especially in the U.S. This resulted in
bull-market runs, but entailed high risks of precipitous downturns. De
Jong pointed to the global market scare in April and May last year
after world indices rose too high.
Regarding the Jakarta bourse, Peter said he was confident about the
prospects of the stock market, although its average price-to-earnings
ratio of 18 percent was higher than most of its Asian peers.
Peter also referred to the risks posed by inflation toward the local
market's prospects.
Lending rates also continued to be high, hampering growth in terms of
spending, business expansion and employment, although the central bank
would likely lower its key rate further to 9 percent by the year's end.
Bank Indonesia's latest consumer confidence survey shows a decline in
the number of consumers expressing optimism about their ability to
purchase durable goods, with the index slipping to 94.6 in January from
99.1 in December.
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