Drops in U.S. stock markets may weaken Jakarta bourse

JAKARTA (JP): Weak sentiment in the global market, driven by a recent series of drops in the U.S. stock markets, will further weaken the Jakarta Composite Index this week after it fell 2.5 percent last week, equity analysts have said.

The analysts said pale global sentiment and the absence of foreign investors in the local market would send the Composite Index down again.

"Next week the market will be very cautious amid the weak global sentiment," said equity analyst Martin P.H. Panggabean on the weekend.

"The slump in the Dow Jones and Nasdaq markets has upset major stock markets around the world, including the Jakarta Stock Exchange (JSX)," he added.

Other analysts also acknowledged the impact of a weak global sentiment but said the local stock exchange -- which was already at a low point -- would not react as badly as other regional stock exchanges.

An analyst with a local securities house added that the global stock exchange slump was initially caused by the recent steep dive of high-tech stocks in the U.S.

"JSX does not have that many high-tech stocks. Thus, it should not be too badly affected hopefully," he said.

But street demonstrations will also weigh negatively on JSX trading this week, he added.

"The case involving former president Soeharto will certainly remain a main issue for the street demonstrations next week," he said over the weekend.

The students' demonstration last week went to the Attorney General's Office to call for a more firm and prompt move in the investigation of the former strongman.

The government recently named Soeharto a suspect in a reinstated investigation of alleged corruption during his terms in office.

However, the slow progress of the inquiry has drawn strong protest from the public who demand prompt action.

Stock analysts and currency dealers did not see the government's success in rescheduling US$5.8 billion in sovereign debt at the recent meeting of the Paris Club of creditor nations improve sentiment on the JSX or on the money market.

"We did not see any strengthening of the rupiah against the U.S. dollar due to the Paris Club accord," Pardy Kendy, the managing director of listed Bank Buana Indonesia, said last week.

This was because the market anticipated a positive outcome from the Paris Club.

"It did not have any significant difference whether it (the rescheduled debt) was $2.1 billion or $5.8 billion," he said.

Indonesia initially expected to reschedule $2.1 billion in debts due this year, but the Paris Club agreed on Thursday to reschedule a total debt of $5.8 billion maturing this year to the first quarter of 2002.

Another reason why the market did not react positively to the Paris Club news was because the rescheduling agreement was strictly conditional upon the further support of the International Monetary Fund (IMF), Pardy said.

"The Paris Club rescheduling agreement requires an endorsement from the IMF," he said.

Meanwhile, he said, the IMF's endorsement was dependent on the Indonesian government's ability to complete on schedule the reform package as agreed upon by the IMF.

The Indonesian government has set a new deadline of April 21 to complete its economic reforms after failing to meet the initial deadline at the end of March, which led to a delay in the disbursement of $400 million in the IMF's aid package to Indonesia.

"So market attention has now turned to the government's ability to meet this new deadline," he added.

The local currency closed slightly stronger last week at Rp 7,625 compared to Rp 7,663 the previous week.

The index dropped 2.5 percent last week to close at 556.78 points, down from 570.81 the previous week. The daily average transaction value decreased to Rp 374.28 billion last week, compared to Rp 483.2 billion during the previous week.

The daily average turnover also decreased to 307.4 million shares from 337.3 million shares the previous week.

Last week's top gainers were PT Maskapai Reasuransi, whose shares jumped by 53.85 percent, PT Mitra Rajasa by 38.46 percent and PT Inter-Pacific Bank by 33.33 percent.

PT Telkom announced last week that it would distribute dividends of Rp 53.87 per share between late May and early November this year.

The week's big losers were PT Kridaperdana Indahgraha, whose shares fell by 43.55 percent, PT Super Mitory Utama by 31.25 percent and PT Sepatu Bata by 27.09 percent.

Top brokerage firms by transaction value were PT Vickers Ballas with Rp 295.57 billion in transactions, PT Credit Lyonnais with Rp 168.71 billion and PT Danareksa Sekuritas with Rp 139.70 billion. (udi)