Analysts say stocks, rupiah to plummet after Bali terror

A'an Suryana, The Jakarta Post, Jakarta

The Jakarta stock market and the rupiah were expected to fall steeply this week, following devastating bomb blasts on the tourist island of Bali over the weekend, which killed nearly 200 people, mostly Australian tourists, stock and currency analysts said on Sunday.

"The news is a terrible shock. It was the world's second largest terrorist (bomb) attack on civilians after the Sept. 11 attacks," Jasso Winarto, stock analyst with Sigma Research Institute, told The Jakarta Post.

Panic selling could well hit Jakarta's stock exchange, which would further drag it down after a bearish trend which began in September and continued until the close on Friday.

"Psychologically, the investors will consider Indonesia unsafe for investment and they will pull their money out of the country," Jasso explained, adding that the investors will take their money to safer countries.

Foreign tourists will also leave now or cancel future trips here, which could devastate the tourist industry, he said.

It could take as much as one or two years before the international community will again view Indonesia as safe for tourists, Jasso said.

The tourism industry contributed foreign exchange earnings last year amounting to some US$5.4 billion, the third largest foreign exchange earner here after the textile and garment industries.

The tourism industry, particularly in Bali, has proven to be quite resilient despite the economic crisis and has become one of the key drivers of economic growth during the difficult period. It could remain in limbo for a long period as the consequence of the Bali tragedy, said Jasso.

Another stock analyst, Zulfikar, concurred, saying that the stock market would dive precipitously this week.

"The bomb blasts will aggravate an already bad situation. Even without the bomb blasts, the stock market was expected to fall further this week," said Zulfikar of Mandiri Sekuritas.

The Jakarta stock index declined everyday last week to close at 376.46 on Friday. It closed at 408.43 the previous week.

The global stock markets, including Indonesia, have been in limbo for many weeks amid fears over a possible U.S. attack on Iraq.

Jasso predicted the Jakarta stock index would drop between three to four percent, while Zulfikar expected a drop of between 10 and 20 points.

The currency market, which saw the rupiah stabilize at the Rp 9,000 to a dollar in recent months, will also feel the impact of the Bali attacks.

Currency analyst Wiwan Wiradjaja said the rupiah would weaken, as market players and tourists would rush to sell their rupiah before leaving the country en masse.

"Speculators are also set to take advantage of the situation and push down the rupiah," said Wiwan.