Dormant trading likely to stay on local market

JAKARTA (JP): Trading activities in the country's paralyzed stock market will remain lethargic this week with the benchmark price index likely to sink further below the key-400 point level again, stock analysts and brokers have said.

They said the lack of fresh incentives amid prevailing uncertainty in the country's political front would discourage investors from putting their funds in the local bourse.

"Foreign investors remain cautious over the country's political situation," head of equity sales of the state Bahana Securities Andre Cita said over the weekend.

He said that although a debt accord to restructure the country's corporate overseas debt was good and the rupiah strengthened against the U.S. dollar in late trading last week, it could not yet ignite investors sentiment in the country's dire financial market.

The rupiah closed at 14,400 to the dollar last week, 14.2 percent lower than its close at 12,500 the previous week.

He said that trading activities in the local market would depend on the movement of the rupiah because the ups and downs of the rupiah in the currency market would determine the movement of the benchmark price index in the local bourse.

"So the rupiah will remain the main focus," Andre said.

Another analyst with a local securities company said that the government's painstaking efforts to bring the country out of its dire crisis would not automatically attract offshore funds into the country because such efforts were vehemently overshadowed by persistent political uncertainty.

Shadow

He said possible protests demanding the government to lower food prices and introduce clear-cut measures to resolve the country's political uncertainty would cast a shadow on trading activities in the local market.

"Whatever efforts are made, the government will not lure foreign investors sentiment because they still fear the possibility of political unrest in the coming days," he said.

The analyst said that local investors, mostly ethnic Chinese, who fled the country after riots and looting on May 14, took with them approximately US$10 billion.

"These people are still scared to put their funds back here for fear of more political unrest," he said.

Bahana's Andre said that offshore funds perceive that the country's political situation, despite assurance by the security officers, remain the biggest obstacle to allocate their funds back here.

"Or even if they place limited funds here, it will be for a temporary period," he said, adding that the country's medium- and long-term prospects remain gloomy.

A broker with Bali Securities said that most foreign brokerage houses had hardly made any long-term investment here since May after witnessing massive riots and looting by mobs, targeted at ethnic Chinese.

"Even if there are some foreign brokerage firms placing orders, it will be for a short-time, not for long term investment," the broker said.

Analysts and brokers said another tranche release of the International Monetary Fund (IMF)-brokered fund would not do much to improve the country's dire economy.

"Though the IMF's fund is good in nature, it will not help resolve the country's many problems," the Bali Securities' broker said.

Managing director of Harita securities Christina Lim said that the country was currently racing against time to solve food shortages, soaring unemployment, spiraling inflation rates and political instability.

"The IMF's fund alone will not solve the whole problem because more efforts are needed," she said.

The JSX Composite Index closed 17.08 points or 4.2 percent higher to 425.45 last week from 408.37 points the previous week.

Daily turnover over the week averaged 242.42 million shares changing hands last week compared to 231.75 million the previous week.

Daily transactions averaged Rp 325.61 billion last week compared to Rp 238.83 billion the previous week. (aly)