Indonesia's main stock index (IHSG) increased 3.98 points to close at 4,724.41 on the last trading day (19/07). During last week, the index rose a limited 1.97 percent amid the context of a weakening IDR rupiah (Indonesia's currency even fell below the psychological boundary of IDR 10,000 against the US dollar). The IHSG's performance last week was mainly supported by rising shares in the country's finance, property, construction and metal mining sectors, while the cement and plantation sectors were corrected.
The movement of the IHSG consolidated with volume and value of transactions slightly diminishing. The daily average transaction volume in the regular market last week was only 3.35 billion shares, lower than previous week's 3.62 billion shares. The daily average value of transactions was only IDR 4.57 trillion (USD $457 million), down from last week's IDR 5.15 trillion (USD $515 million).
A factor that was driving Indonesia's market last week was investors' anticipation to companies' financial results in Q2-2013, which are released from the end of this month. External factors that influenced the IHSG last week included economic data that indicate an improving US economy and Bernanke's testimony which provided room for continued stimulus if the US economy does not continue its recovery. Wall Street closed flat last week, with the Dow Jones Index falling 0.03 percent to 15,543.74 (mainly triggered by Google and Microsoft earnings that were below market expectation). However, global stock indices tended to close in positive territory last week.
Entering this week's trading week, selective buying is likely to occur in anticipation of Q2-2013 earnings results. But any gains are expected to be limited due to profit taking. I still do not see conducive market conditions yet because investors are concerned about the higher inflation rate of Indonesia that could trigger higher interest rates and cause an economic slowdown, coupled with the weakening rupiah. Therefore, I assume that the IHSG will test the resistance level in the range of 4,810 and support level around 4,610.
David Sutyanto is a research analyst at Jakarta-based First Asia Capital