Kresna Securities

WITH Indonesia's economy seemingly on a strong growth path, equity investors are licking their lips in anticipation of another stellar year for the country's stock market.

In 2004, the Indonesian market was one of the best-performing in the world, providing investors with a 45 per cent return on their funds. The outlook for this year is not as great but market analysts still predict that the Jakarta Composite Index will rise between 25 per cent and 30 per cent.
Already at a historic high, the JCI is expected to breach the 1,200 level and head towards 1,300 by the end of the year. It closed at 1,182 points on Friday.
'Last year the Indonesian market went up by 45 per cent and so far this year it has already gone up 18 per cent,' said Kelvin Long, senior market strategist at Samuel Securities. 'I think there is room for the market to go up further, especially if the reporting season is good.' David Chang, director of research at Kresna Securities, added that although there were still some uncertainties hovering over the market, the dark clouds seem to have been lifted by the rupiah's better-than-expected reaction to the revaluation of the yuan last week and the government's handling of the fuel crisis.
'One and a half months ago, we were concerned about the fuel shortage crisis and the direction of the rupiah, given the rising interest rate environment,' he noted. 'But it seems some of the pressure has been lifted and things are becoming clearer.'
The reasons behind the bullish sentiment are plentiful but two stand out - political stability following the country's first ever direct presidential elections - and an expanding economy. Both factors, say market analysts, will contribute to strong corporate earnings this year.
In its annual review, the International Monetary Fund forecast that Indonesia's economy would expand 6 per cent this year, and said it expected the country's gross domestic product to grow 6 to 7 per cent a year over the medium term 'assuming that the government's economic policies are implemented as planned'.
The multilateral lender added that the economy had performed well but warned of market shifts that have weakened the rupiah against the US dollar and pushed up inflation. It therefore urged the government to raise interest rates to foster economic stability and confidence.
Indeed, inflation is a major worry, and investors and market analysts alike are keeping a very close eye on interest rates as Bank Indonesia, the country's central bank, has so far resisted increasing rates too aggressively so as not to dampen consumer spending.
'The main obstacles for the stock market are rising oil prices and a sharp rise in interest rates,' noted Mr Long. 'These are the two factors that can stop the stock market from rising further.' He added that he remained bullish and optimistic that the market has a lot more legs to run on, given the amount of corporate activity over the past two years.
'The corporate mood has definitely changed because of the number of corporate takeovers and the number of banks being sold to foreign investors,' Mr Long said. 'FDIs are now starting to flow in and I think this is the beginning of the cycle. I expect money to keep flowing in.'
If money does keep flowing in, then sectors such as infrastructure, telecommunications and consumer goods will do well, he noted.
Mr Chang picks the mining and agricultural sectors as his favourites to do well this year, given the rising global demand for coal and other minerals and high commodity prices.
Indonesia is very competitive in both sectors.
'The index is already at an all-time high and there are some doubts that it can keep going up significantly especially if interest rates start to go up,' he said. 'But people still believe in the Indonesian macro-economic story, and that is a stronger factor for longer-term investors.'

Market Info

Reksa Dana
	06/09/10	05/09/10
Pasar Uang
MRS CASH KRESNA	1,000.0000	1,000.0000
Pendapatan Tetap
MRS BOND KRESNA	1,209.6147	-
Campuran
IPB Syariah	2,027.4403	2,009.9098
IPB-Kresna	2,586.3854	2,580.3578
MRS FLEX KRESNA	1,426.2590	-
Indeks
Kresna Indeks 45	2,654.3303	-

Kresna Indeks 45