Local stock marts see bullish prospect<\/p>\n
JAKARTA (JP): Crosby Securities of Hong Kong is very upbeat
\nabout the prospects for Indonesia's capital market over the next
\nfive years despite the current dip stemming from the Mexican
\nfinancial crisis.<\/p>\n
The company's president, Timothy Beardson, told journalists
\nyesterday that, assuming that Indonesia's economy will grow by
\nbetween 6.5 percent and seven percent per annum, capitalization
\non Indonesia's stock exchanges is expected to expand by 50
\npercent to over US$75 billion within the next five years.<\/p>\n
Crosby forecast that growth of the earnings per share among
\nIndonesian listed companies would be about 20 to 25 percent per
\nannum, while the annual profit growth from bonds would be about
\n15 to 16 percent.<\/p>\n
"Inflation will slowly come down in the future, showing less
\ndepreciation (of rupiah against the U.S. dollar)... In that
\nscenario, it will be very positive for investors in bond markets,
\nincluding foreign investors," Beardson said.<\/p>\n
The Indonesian government devalued the rupiah against the U.S.
\ndollar in 1986. Since then the government has not devalued the
\ncurrency again. Instead, it gradually depreciates the rupiah
\nvalue against the dollar. This year, the governments has set a
\ntarget of four percent depreciation per annum.<\/p>\n
Despite current dramatic slumps in stock values on most
\nemerging markets, Crosby predicts that the Jakarta Stock Exchange
\nindex will triple to 1,200 by year 2000.<\/p>\n
The Jakarta Stock Exchange Composite Index yesterday rose 5.42
\npoints to 447.29 after taking a steep plunge last week to 12-
\nmonth low of 441.87. Last week's bearish mood was resulted from
\nworldwide anxiety over Mexico's crisis, which was triggered by
\nits recent move of devaluing the peso by 15 percent against the
\ndollar. The peso has now lost nearly 70 percent of its pre-
\ndevaluation value against the greenback.<\/p>\n
"It's normal to be up and down in the short term. But in the
\nlong run, the trend here is upward," said Beardson, in Jakarta to
\nattend the fifth anniversary of PT Crosby Indonesia, an affiliate
\nof Crosby Securities.<\/p>\n
Temporary<\/p>\n
Beardson said the downward movement of the stock index would
\nbe temporary. As soon as fund managers rediscover Asian emerging
\nmarkets, including Indonesia, the condition would return to
\nnormal, he said.<\/p>\n
He explained that most American, Japanese and British
\ninvestors see the emerging markets as a whole, without
\ndifferentiating between individual countries; even though they
\nhave very different characteristics, especially in work ethics,
\nsavings rates, investment rates, currency rates and current
\naccount deficits.<\/p>\n
Raymond Foo of Crosby Indonesia noted that the economic
\nfundamentals in Indonesia and Mexico are very different.
\nIndonesia's economic growth of over six percent per annum relies
\non its large savings and investments, while Mexico's growth of
\nless than four percent counts on high domestic consumption
\ndemand.<\/p>\n
Foo said the Indonesian government's target in private
\ninvestment, which are expected to account for 80 percent of the
\ncountry's projected total new investment of Rp 660 trillion
\n(US$300 billion) in the next five years, would drive local stock
\nmarkets to become bullish in the coming years.<\/p>\n
"We expect a higher ratio of market capitalization to gross
\ndomestic product, as some $20 billion will be generated from bond
\nand capital markets annually," Foo said. (rid)<\/p>",
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