Economic Growth Supports Index Performance

Economic growth in the first quarter of 2011 at 6.5 percent can bring positive sentiment to the Jakarta Composite Index until the beginning of next week, according to analysts. Although the global market is experiencing a correction trend, the official economic growth figure can increase investor expectations.

Nico Omer Jonckheere, Vice President and Research Analyst from Valbury Asia Securities, said that the economic growth helped the domestic market weather negative external sentiment. “The Dow Jones experienced a slight correction, which generally affects the domestic market. But with the announcement of economic growth in the first quarter, the market should be able to weather it,” he said, Thursday.

The Dow Jones was closed down with 89.93 points (0.66 percent) on Wednesday to 12,723.53. One of the causes is the new job creation rate that is below expectations. In April, the United States created 179 thousand new jobs, lower than the 207 thousand in March.

Jonckheere said that Indonesia's economic growth will add to foreign investors' confidence so foreign capital inflows will continue, with some corrections due to profit-taking. He said that consumer goods and banking and property reaped the largest benefits from positive economic growth.

Previously, the National Statistics Agency announced the economic growth rate of 6.5 percent (year-on-year) for the first quarter, which is higher than the median of the IFT research projection from nine economists at 6.45 percent.

Economic growth is still supported by household consumption, with a 4.5 percent growth rate and a 55.7 percent contribution to gross domestic product (GDP). Cargo and communication, which grew by 13.8 percent, also supported the growth. The largest contributor to GDP is still manufacturing, with 24.1 percent.

Budi Ruseno, Director of MNC Securities, said that the positive sentiment from the announcement was evident from Thursday this week. The Index was closed increasing by 1.34 points or 0.04 percent to 3,816.27 after experiencing a correction in the first trade session.