Political doubt remains problem in capital mart<\/p>\n
JAKARTA (JP): High interest rates and political uncertainty
\nwill continue to cast a shadow over the capital market in the
\nimmediate future, analysts have said.<\/p>\n
They said a qualifying comment that last week's debt agreement
\nallowing Indonesian debtors to reschedule their foreign debts and
\nan encouraging signal about the disbursement of the International
\nMonetary Fund's second tranche loan for the country should bring
\na fresh wind to the local stock market.<\/p>\n
But, they said any positive sentiment from the two fundamental
\nfactors would be still overshadowed by local political affairs
\nand high interest rates, which still stand at over 50 percent per
\nannum.<\/p>\n
Moreover, said head of research of Socgen Crosby Securities
\nIndonesia Goei Siauw Hong, the debt deal, to be effective in
\nAugust, would not be enough for many local companies.<\/p>\n
He said that many local companies were already too weak even
\nto pay the interest on their foreign debts, which has more than
\ntripled in terms of rupiah due to the currency's sharp
\ndepreciation against the U.S. dollar since July last year.<\/p>\n
\"The problem is that most Indonesian borrowers have no dollar-
\nbased income sources,\" another analyst said.<\/p>\n
Hong said many local companies had not even serviced the
\ninterest payments since January this year due to their ailing
\noperations and the sharp increase in debts.<\/p>\n
The debt agreement, which revived the market sentiment for a
\nwhile in an euphoric response last week, gave Indonesian debt-
\nridden companies eight years to pay off their liabilities and a
\nthree-year grace period in which they need pay only interest.<\/p>\n
\"Though the deal is good, it just cannot solve the entire
\nproblem because the country's overseas debt is so huge that it is
\nalmost impossible to repay it,\" he said.<\/p>\n
Dealers said the beleaguered rupiah, which has plunged almost
\n80 percent in value since July last year, received no respite
\nfrom the debt agreement because the currency remained stuck below
\nthe 11,500 level against the U.S. dollar.<\/p>\n
An analyst with Danareksa Sekuritas, Raden Pardede, said that
\nthe country's battered financial market was expected to further
\ndeteriorate due to deepening poverty, spiraling inflation, rising
\nunemployment and escalating political uncertainty.<\/p>\n
\"Deepening poverty and food shortages will likely lead people
\nto stage protests, causing another outbreak of mass unrest in the
\ncoming months,\" he said.<\/p>\n
Stock analysts and dealers said the likelihood of the release
\nof the IMF loan package to bring Indonesia out of its economic
\nplight in the weeks ahead would not be able to improve the market
\nsentiment.<\/p>\n
\"Even if the IMF releases its fund, its significance has been
\nundermined because the country is currently struggling with food
\nshortages,\" Raden said.<\/p>\n
Indonesia was initially expected to receive US$1 billion in
\nfunding on June 4 but its payment was postponed due to political
\nturmoil.<\/p>\n
The IMF has so far disbursed about $4 billion from about $10
\nbillion it pledged in a $43 billion loan package to cope with
\nIndonesia's worst-ever economic crisis.<\/p>\n
Stockbrokers and analysts said the country's persistent
\npolitical uncertainty remain a major problem for foreign fund
\nmanagers to place their funds in the country's dire market.<\/p>\n
They said that most foreign brokerage firms operating in the
\nlocal exchange continue to place large selling orders on the
\nstocks they held over the past few weeks.<\/p>\n
They said that foreign investors continued to discard the
\nstocks especially those linked to former president Soeharto's
\nfamily and his associates, like Bimantara Citra, toll-road
\noperator Citra Marga Nusaphala Persada, noodle maker Indofood
\nSukses Makmur and cement maker Indocement Tunggal Perkasa, due to
\nmounting public calls to investigate their wealth.<\/p>\n
\"This stocks are likely to remain under selling pressure this
\nweek,\" another broker said.<\/p>\n
The JSX Composite Index fell 2.56 percent to 409.51 points
\nlast week from 420.26 the previous week.<\/p>\n
But the average daily turnover rose 25 percent to 304.59
\nmillion shares changing hands last week from 243.49 million
\nshares the previous week.<\/p>\n
The average daily transaction value also rose 26 percent Rp
\n332.87 billion ($30.26 million) last week from Rp 263.43 billion
\nthe previous week.<\/p>\n
A chief dealer with Bali Securities Hendra Sunarto said
\ntrading activities in the local bourse would remain sluggish due
\nto the persistent political uncertainty.<\/p>\n
He said that a slight increase in stock prices on the local
\nbourse late week was due to the market's euphoric response to the
\ndebt accord between the Indonesian debtors and foreign creditors
\non Thursday.<\/p>\n
\"The mild rise in stock prices was supported by local
\nspeculative buying. It did not reflect the return of foreign
\ninvestors' confidence,' he said. (aly)<\/p>",
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