Jakarta (Antara Bali) - PT Bahana Securities predicted that the Jakarta composite index (IHSG) will hit a new record high crossing the 6,000 point mark this year.
The index of the Indonesian Stock Exchange (IDX) closed last year at 5,296 points.
"With prevailing economic optimism , IHSG would shoot up to 6,000 points this year," the chief researcher of the securities company Harry Su said here on Monday.
Based on its latest research, Bahana predicted the country's economy would grow 5.3 percent , higher than the government's target of 5.1 percent, Harry said.
With that growth rate, assuming that Bank Indonesia, the country's central bank, still has room for cutting its benchmark interest rate by 50 basis points, the purchasing power of the people would increase, he said.
In addition, the the government spending is also expected to increase to serve as a catalyst for growth after the government's success in its tax amnesty program, he said.
Rising trend of the commodity prices in the global market would also give a positive impact on the country's exports.
Despite pressure from the increase in the price of subsidized electricity, inflation is expected to be kept under control below 4 percent in 2017, he said.
Meanwhile, the difference between the coupon rate of 10-year government bonds and that of US T-bills is expected to remain stable at around 550 basis point, although The Red would raise its fund rate this year, he said.
"This would allow Bank Indonesia room for slashing its interest rate as long as the inflation and financial stability remains under control," he said.
Bahana estimates the country's inflation in 2017 would average 3.7 percent taking into account the rise in electricity tariff, he said.
Economic recovery would finally lead to increase in imports and widening current account deficit, which is predicted to reach 2.3 percent or higher than last year's estimate of 2 percent.
Harry Su said Bahana held a road show to Europe in Mid December and met with potential investors in several countries in that continent.
The legal case against Jakarta Governor Basuki Tjahaja Purnama (Ahok) gave a negative sentiment among European investors.
"The gubernatorial election in Jakarta would give a reflection of what would happen in the next presidential election in the country in 2019," he said.
If Indonesia could cope with the political hullabaloo, Bahana is confident the government foundation is stronger to go ahead fast and lure in more investment, he said.
With the mix of optimism and political uproar shadowing Indonesia this year, Bahana recommends investor to buy the shares of Astra Internasional (ASII) with price target of Rp10,000, Telekomunikasi Indonesia (TLKM) with price target of Rp5,000, Wijaya Karya (WIKA) with price target of Rp3,267, and Ciputra Development (CTRA) with price target of Rp1,800 per share. (WDY)
