Bank Mandiri makes impressive stock market debut

Evi Mariani and Rendi Witular, The Jakarta Post, Jakarta

Shares of the giant state-owned Bank Mandiri made an impressive debut on Monday, surging by 25.9 percent, which some say may reflect growing investor confidence in the economy.

While most shares on the Jakarta Stock Exchange (JSX) suffered losses after a bomb exploded at the House of Representatives in the morning, foreign investors who failed to get enough of Mandiri shares from the initial public offering (IPO) earlier in the month rushed in, pushing the price up to Rp 850, or Rp 175 higher than IPO price of Rp 675, dealers said.

"There is still a huge potential for the Mandiri share price to go up. I predict that within a one-year period, the shares can reach Rp 1,175 or 1.4 times its book value," BNI Securities banking analyst Fendi Susiyanto told The Jakarta Post.

Mandiri, the country's largest bank in terms of assets, offered 20 percent of its stake in the country's largest IPO since the 1997 financial crisis and the largest bank share issuance in Asia, outside Japan. The IPO was more than seven times oversubscribed, with foreign institutional investors taking 69 percent of the 4 billion shares on offer -- of which 30 percent came from Asia, 37 percent from Europe, and 33 percent from North America. The Rp 2.7 trillion (about US$329 million) proceeds raised from the IPO will help finance the 2003 state budget deficit.

Mandiri is now the six largest counter in the Jakarta stock exchange in terms of market capitalization, which means that Mandiri can move the index up by 0.17 percent for every one point climb in its share price. Indeed, the strong gains on Monday helped the JSX index to close 2 percent higher at 534.96 despite the bomb blast.

The IPO was launched at a time when confidence in the country's economy has started to improve amid rising stability in macroeconomic indicators, and as foreign investors were aggressively seeking higher returns from local assets due to the global weakening of the U.S. dollar.

Although the stellar performance of the Mandiri shares may indicate rising foreign investor confidence in the country's economy, the bomb blast on Monday could revive fears of political uncertainty ahead of the 2004 general election and the war against terrorism.

But the government is hopeful that the successful Mandiri IPO could be repeated in the upcoming IPO of two other state-owned firms this year: Bank BRI and gas distribution firm PGN.