T

he current bullish trend at Indonesia’s stock market is forecast to continue next year, with an estimated growth of up to 47 percent thanks mainly to strong economic fundamentals in the country, analysts said.

Alfatih, an analyst at Samuel Sekuritas, said according to technical valuations, the Jakarta Composite Index (JCI) could reach up to 5,600 in 2011, a 47 percent increase compared to this year, which is forecast to reach 3,800 by year-end.

“At the end of the year, the 3,800 mark is likely to be achieved. As for 2011, the index will reach around 4,500 to 5,600,” Alfatih told a capital market workshop for journalists at the Indonesia Stock Exchange (IDX) building in Jakarta.

The workshop was organized by the Indonesian Association of Securities Analysts (AAEI).

Also speaking was Recapital Securities head of research Pardomuan Sihombing, who believed the stock market could continue its stellar performance next year, attributed to strengthening economic fundamentals, better rating upgrade and capital inflows pouring in as factors of the positive outlook.

“The combined achievements of the country’s economy will create a positive sentiment for the market,” Pardomuan said.

Indonesia’s economic growth, which is forecast to surpass 6 percent this year and reached 6.4 percent in 2011, is higher than that of developed nations, whose economies are slowing in the midst of global economic recovery.

Developed nations’ move to lower interest rates to close to 0 percent has also seen foreign funds shifting to invest in emerging markets, including Indonesia, which offer higher returns with high-yielding papers due to relatively higher benchmark interest rates.

The influx of foreign funds in Indonesia’s stock market has resulted in a net foreign purchase of Rp 20 trillion in stocks up to Nov. 12, according to data from the central bank, helping the JCI score record highs since the start of this year.

The index reached the highest level in the nation’s stock market history on Nov. 10 at 3,756.97 but closed at 3,725 on Friday.

Based on the latest figure, the benchmark JCI has grown 44.66 percent so far this year, Asia’s best performer.

This year’s gain, the biggest among Asia’s 10 largest markets, drove valuations to 31 times reported earnings, or twice the MSCI emerging market index’s 14.9 multiple, making it the most expensive bourse in the region, Bloomberg reported.

Although the rally has resulted in expensive share prices in the stock market in terms of price-to-earnings (PE) ratio, the analysts’ association agreed that the market still had room to grow, as companies are expected to perform better next year, under the assumption that the economy will grow faster in 2011.

“Besides, our market capitalization is still roughly 60 percent of the country’s gross domestic product (GDP). In large bourses, market capitalization could be more than 100 percent of the countries’ GDP,” Pardomuan said.

The analysts also said that stocks of companies that work in the coal, crude palm oil, consumer goods and property sectors may be the ones to look at in the midst of the share prices surge. (est)