Wed, 07 May 2003

Danamon sale further lifts sentiment in RI

Dadan Wijaksana The Jakarta Post Jakarta

The relatively successful sale of Bank Danamon is providing additional attractiveness for foreign investors to put their money here amid growing uncertainties in other parts of the region.

Some investors have already been encouraged by a host of recent positive economic data including strong first-quarter export performance, benign inflation, declining interest rates and a much stronger level of foreign exchange reserves.

All this has contributed to the strong appreciation in the exchange rate of the rupiah against the U.S. dollar, and the rally in the local stock market.

As the country has been considered relatively free from Severe Acute Respiratory Syndrome (SARS) with no reported deaths, while other countries in the region are battling hard to curb the epidemic, some investors have started to turn their investment radar on Indonesia.

"Investment wise, Indonesia is now considered more attractive than many of the countries in the region under the unfavorable global economy," StanChart economist Fauzi Ikhsan told The Jakarta Post on Tuesday.

"The country's continued improvement in its macroeconomic stability should confirm Indonesia's competitive edge compared to others."

Indeed, the rupiah strengthened to a 11-month high against the dollar in morning trading, before closing flat at Rp 8,620 late on Tuesday due to profit taking.

Dealers said that the sale of the government's 51 percent stake in Bank Danamon to a consortium led by Singapore's Temasek Holdings had lifted sentiment in the local currency.

The Bank Danamon sale does not only mean more dollars to come in, but is also a strong indication that the government is highly committed to carrying out its economic reform program.

The surge in the rupiah boosted sentiment in the Jakarta Stock Exchange, pushing the index one percent higher at 463.61, the highest level this year. Traders also said that the sale of Bank Danamon had encouraged investors to buy other blue chip companies.

The government is also planning to sell another 20 percent stake in Bank Danamon through the stock market.

Thanks to a controllable inflation, the central bank has been cutting its benchmark interest rate in recent past months.

More good news came from the country's trading performance. The Central Bureau of Statistics (BPS) reported last week a nearly 16 percent rise in exports in the first quarter compared to the same period last year pushed by higher prices of commodities. The higher export revenue helped increase the country's foreign exchange reserves to a record US$33 billion.