Abdurrahman ouster good, but won't lure funds

Abdurrahman ouster good, but won't lure funds

HONG KONG (Dow Jones): Aberdeen Asset Management Asia Ltd.
director Peter Hames is all praise for the leadership change in
Indonesia but he isn't ready to pour more funds into the country
just yet.

Despite what he calls a "major turning point" in recent
Indonesian political history, Hames isn't prepared to increase
his investment and he's almost certain most other fund managers
share his view.

Indonesia's legislature voted late Monday to oust President
Abdurrahman Wahid and replace him with Vice-President Megawati
Sukarnoputri.

"This change in the government is well-received by investors.
For one thing, it puts an end to the maneuvering that's being
going on," Hames told Dow Jones Newswires.

"But many challenges remain, huge tasks await. You won't see
funds rushing to invest," Hames added.

Hames adds that as an outsider looking in, it's "not that
easy" to fully analyze Indonesian politics.

Hames isn't surprised about the turnaround in the stock market
Tuesday, noting that investors are aware that the transition to a
new administration will bring a lot of uncertainties.

Singapore-based Hames said Aberdeen plans to keep its exposure
in Indonesia at 4.5 percent of an estimated S$5 million (US$2.7
million) Pacific Equity Fund. Aberdeen's exposure to Indonesia is
lower than its 6.5 percent in Thailand and 6% in Malaysia, but
larger than its 3% in the Philippines.

"We are comfortable with our portfolio and the valuations. We
won't be buying or selling stocks," Hames said.

Hames said Aberdeen's choice of stocks in Indonesia, which the
fund manager has kept long-term, are those that are less
sensitive to politics and more independent of macroeconomic
conditions.

Aberdeen's major holdings in Indonesia include consumer
products company Unilever Indonesia and cigarette-maker Gudang
Garam. believes these companies have good cash flow, minimal debt
and strong franchises and brand names.

Hames expects the next few months to be a "honeymoon period"
for the Megawati administration, one that should be taken
advantage of by Indonesia's current leaders.

"Many investors will be in a wait-and-see mode for a few
months. But after that, investors will be more demanding.
Investors will need to see that the government is moving ahead
with reforms," Hames said.

Hames believes Megawati's selection of her Cabinet will make a
crucial first impression on investors about her political
leadership.

Many in Indonesia consider Megawati a novice in politics
despite her stint as vice-president and her exposure as the
daughter of the country's founding president Sukarno.

No one knows for sure what kind of policies Megawati will
actually pursue because she has revealed very little, publicly,
about her positions.

Hames expects investors to keep a scorecard of Megawati's
early solutions to Indonesia's economic deterioration.

A resolution to the impasse over the International Monetary
Fund loan to Indonesia is one concrete development that could
convince investors to increase portfolio allocations to
Indonesia, Hames said.