There are two questions that are frequently asked these last few days. The first one is 'until when will foreign investors continue to sell their Indonesian assets?' And the second question is 'in what direction will the IHSG move in the near future?'

Regarding the first question, it is difficult to provide an accurate answer. It is important to take a closer look at the underlying reasons that trigger foreigners to sell their stocks. From the start of 2013, the IHSG has risen 20 percent. This growth rate makes it very tempting for investors to engage in profit taking, particularly when the market is threatened by global and domestic economic circumstances. Continued global turmoil and uncertainty impacts on the performance of the Indonesia stock index, while various domestic economic data have not met expectations that were set at the start of the year.

Indonesia's economy was expected to grow between 6.3 and 6.5 percent, but in reality Q1 growth was recorded at 6.02 percent. Moreover, inflation is likely to increase to 7.2 percent, far above the initial target of 4.5 to 5.5 percent. Lastly, Indonesia's trade deficit brings negative market sentiments as it is assumed to continue at least until the end of the second quarter of 2013. However, as the price of subsidized fuel is expected to be increased significantly soon, the government will have more financial means to spur faster economic growth. Indonesia's central bank (Bank Indonesia) expects that the country's trade balance will show a surplus in Q2 2013. GDP growth that exceeds six percent should also form a firm foundation to build on.

Improvement of the economy of the United States is in fact a double-edged sword. On the one hand, the economic recovery has been eagerly awaited as it will have a good impact on the world economy. On the other hand, it also makes the Federal Reserve to review its quantitative easing program. And if the stimulus package is not continued, it will result in the withdrawal of funds from emerging markets, including Indonesia. However, the International Monetary Fund (IMF) downgraded its forecast for economic growth of the United States in 2014. This downgrade makes market players speculate that the stimulus program will be continued. The bottom line of this situation is that the market will continue to speculate, which results in volatile upward and downward swings in the near future.

Regarding the second question, I can answer that - technically - the index has a support level of 4,600. If this level is broken then the next support level is at 4,200. However, up to now, the index has been maintained comfortably above the support level of 4,600. But if foreign selling continues then the index will go toward the 4,200 support level. But it is more important to look at the reasonable price of the IHSG. Using the revised 2013 macroeconomic assumptions of Indonesia, it is indeed expected that the IHSG will lower from 5,050 at the start of the year to the level of 4,936 points. This assumption is supported by the IHSG's current price to earnings ratio (PER) of 15.5 times, whereas the reasonable PER is between 15 and 17 times. Moreover, continued growth in earnings per share (EPS) will also continue to form a good foundation for the IHSG to build on.

Pressures on the IHSG will continue this week. While other analysts focus on the fall of the IHSG, I would tend to stress the current cheap level of the index (a sort of 'great Jakarta discount sale action'). However, the IHSG can weaken further this week; construction, cement, property and consumption stocks can be bought with the strategy 'buy on weakness'. It should at all-times be remembered that the reasonable price of a stock never lies, even in a highly volatile market.

David Sutyanto is a reseach analyst at First Asia Capital