Excitement over the recent endorsement of the Tax Amnesty Law is expected to continue to positively impact the stock market, with the Jakarta Composite Index (JCI) predicted to remain hovering above 5,000 after the Idul Fitri holiday.
The JCI — the main gauge of the Indonesia Stock Exchange (IDX) — performed beyond expectations last week, the same week the legislature passed its first-ever tax amnesty bill.
It broke the psychological level of 5,000 for the first time this year on Thursday on the back heavy capital inflows worth Rp 1.74 trillion (US$132.1 million), the highest daily inflows throughout the week.
In total, the stock market bagged Rp 5.92 trillion net buy last week alone, a jump from Rp 1.3 trillion net buy recorded the previous week. By the end of Friday, the amount of foreign inflows into the IDX stood at Rp 14 trillion.
The positive development forced IDX president director Tito Sulistio to realize his promise of walking on foot from the IDX in Sudirman, Central Jakarta, to his home in Pondok Indah, South Jakarta, last Friday.
Tito told journalists that he hoped to see the JCI reach 5,200 by year-end and even surpass the 6,000 level next year as repatriated funds entered the market.
As preciously reported, the Tax Amnesty Law seeks to facilitate individuals in declaring and repatriating trillions of rupiah of their funds to improve the country’s tax base and state revenues.
A large portion of the funds are estimated to be stashed in overseas tax havens, including Singapore. The government has said it expects to reap at least Rp 165 trillion in additional tax revenues as the funds “return home” this year.
The government and other authorities, including the bourse management and Financial Services Authority (OJK), are preparing investment instruments to welcome the funds.
Koneksi Kapital analyst Alfred Nainggolan said that such positive investor sentiment would remain until March 2017, when the amnesty implementation ends. He predicted that during the July-March period, capital inflows would still stream into the IDX as investors looked for returns in promising markets.
His calculation put JCI movement at between 4,903 and 5,030 at least within the first week post-Idul Fitri because investors would not immediately engage in transactions after the holidays.
The same optimism was voiced by Danareksa Sekuritas analyst Lucky Bayu Purnomo. He predicted that the index could move at least within the range of 4,925 to 5,115 after the holidays.
Another positive sentiment may arise as Bank Indonesia (BI) gears up to implement a new interest rate benchmark in August that is expected to excite the economy, said Lucky.
The central bank is looking to put in place a seven-day reverse repurchase (repo) rate as the new benchmark in August, replacing the current benchmark that uses the 12-month BI certificate (SBI). At present, the repo rate stands at 5.25 percent, lower than the SBI rate of 6.5 percent.
Lucky recommended investors to dig into mining, infrastructure, banking and property sectors, while Alfred advised investors to turn to banking, property and consumer goods sectors.
Both said investment instruments on the bourse were still sufficient to accommodate funds from the tax amnesty, but urged companies to improve their liquidity and performance by conducting more corporate actions.
Kategori:Tax Amnesty in English