Bearish stock market seen continuing

JAKARTA (JP): Share prices of the country's stock market will remain bearish next year as worries over the country's social and political prospects will continue to discourage investors, according to analysts.

Stock market analyst Hasan Zein Mahmud said on Thursday that uncertainty over the country's political format and possible worsening of the social and security situations would continue to cast a shadow across the capital market's activities.

He said that the key factor would be determined by the political atmosphere before and after the general election, which is scheduled for June of next year.

"If the general election runs smoothly and all respect its results, the capital market bull will come back," Hasan, the former president of the Jakarta Stock Exchange (JSX), said in a seminar held by the Capital Market Journalists Club (CMJC).

But he warned that if the election did not run as expected and many party members went on the streets to protest the election results, the country's capital market would plunge to its worst levels yet.

The Indonesian government is scheduled to hold a general election on June 7 next year, followed by the general session of the People's Consultative Assembly (MPR) on Nov. 30 to elect a new president and vice president.

Analysts said they were worried the general election would not solve the problem and that the antigovernment protests, which have taken place almost every day since May, would instead escalate.

Hasan said that another contributory factor to the bearish stock market outlook next year was the worsening of the financial performance of companies listed in the stock exchange.

He said that around 90 percent of the total 289 listed firms in the local market suffered massive losses as the impact of the country's worst ever crisis was fully felt.

The crisis, triggered by the plunge of the rupiah, could worsen if the government's economic recovering measures failed to solve the existing problems, he said.

"If it happens, no one will come to the country to do business and as a consequence Indonesia could further plunge to zero," other analyst said.

The rupiah, which is hovering around 7,500, has lost almost 60 percent of its value against the U.S. dollar since the crisis first hit the country in August during which the rupiah was about 2,500 against the American greenback.

Unlike Hasan, JSX president Cyril D Noerhadi said that despite such a gloomy outlook, some investors would still be tempted to enter the local market to benefit from cheap stocks.

He said that though political turmoil had swept the country in 1998, daily transactions value in the local bourse had declined slightly to Rp 417 billion in the period compared to Rp 489 billion in 1997.

Daily trading volume, however, increased significantly to around 378 million shares per day in 1998 compared to 311 million shares the previous year, he said.

"This shows that the economic crisis has not adversely affected our local market," he said Thursday.

JSX's Composite Index rose 1.2 percent on Thursday to end the day at 403.66 with 261.13 million shares worth Rp 201.89 billion changing hands.

Stock brokers attributed the slight increase to selective program buying on certain blue-chip stocks to benefit from the easing of interest rates in the banking system.

Taking the lead in the share prices, the rupiah remained steady closing unbudged at 7,500 in light trading against the U.S. dollar on Thursday. (aly)