Cabinet lineup casts shadow on stock trading

JAKARTA (JP): The announcement of the much-awaited cabinet lineup by President Soeharto on the weekend will cast a shadow on local stock trading this week, stock analysts said.

Many analysts said the new cabinet lineup would be too weak to cope with the country's worst ever crisis and that the appointments would discourage trading activities.

Tjandra Kartika, head of research at Mashill Jaya Securities acknowledged that the announcement of the new cabinet ended all the speculation about Soeharto's economic team, which had partly caused lethargic trading last week.

"But, unfortunately, the President came up with not so promising a team," another analyst said.

President Soeharto announced on the weekend the list of new cabinet ministers for 1998/2003, which includes tax director general Fuad Bawazier as finance minister and timber tycoon Mohammad "Bob" Hasan as the minister of industry and trade.

Managing director of Harita Securities, Christina Lim, also shared Tjandra's view, saying that the new economic team would send a negative signal to the already weak trading activities, which last week saw daily trading volume drop below 500 millions shares.

Tjandra said that the economic team would be too weak to face the country's battered economy.

He said most of the new ministers were mostly appointed due to their loyalty to the President rather than because of their capabilities.

"I think loyalty is the key criteria in the ministerial posts this period, ignoring such important qualifications as being clean and professional," he said.

Most stockbrokers and analysts expected the new cabinet, despite its shortcomings, to come out with clear-cut measures to deal with the crisis soon, he said.

They said they should leave their inward-outlook ideas and adopt a market-oriented policy if they wanted to meet the market's expectation.

"The new cabinet should announce immediately what measures are to be taken to stabilize the ailing rupiah," Tjandra said.

The rupiah has lost in value around 70 percent to the U.S. dollar since the crisis first hit the country in early July. The currency closed at 10,400 against the greenback from the precrisis level of 2,450

"If the President announces the measure during his first cabinet meeting Monday, then the rupiah will gain ground," Lim said.

The most possible measure, according to Lim, is the introduction of a special rupiah rate for imports of medicine and several essential commodities of at between 5,000 and 5,500 per dollar.

The JSX Composite index closed 5.50 points or 1.1 percent lower to 506.73 points last week from 512.23 the previous week.

Total average daily turnover declined 28 percent to 415.83 million shares changing hands on the regular market last week from 569.14 million the previous week.

Total average daily value dropped by 19 percent to just Rp 552.97 billion (US$53.61 million) last week from Rp 684.88 billion the previous week.

Most blue chip stocks gained last week with state-run telecommunications Telkom rising by Rp 200 to Rp 4,225 and cigarettemaker Gudang Garam by Rp 200 to Rp 10,775, while competitor Sampoerna rose by Rp 75 to Rp 5,800, and satellite operator Indosat remained unchanged at Rp 14,400. (aly)