Financial market calm over next Cabinet lineup
Financial market calm over next Cabinet lineup
By Berni K. Moestafa
JAKARTA (JP): The bullish mood in the financial market will
likely continue this week despite the daunting task awaiting
President Megawati Sukarnoputri's new Cabinet.
Currency and stock analyst Feri Latuhihin at PT Danareksa
Sekuritas said speculation over the possible return of the
Indonesian Democratic Party of Struggle's (PDI-P) top economists
Kwik Kian Gie and Laksamana Sukardi to the Cabinet would bring
fresh hope to the market.
"We're familiar with PDI-P's economists. The market knows the
integrity of Kwik and Laksamana," he told The Jakarta Post over
the weekend.
Vice President Hamzah Haz said on Friday the next Cabinet
would consist mainly of politicians to ensure political support
for the new government.
He also hinted the return of PDI-P politicians Kwik and
Laksamana, saying they were fit for ministerial posts.
Under former president Abdurrahman Wahid's administration,
Kwik and Laksamana served as coordinating minister for the
economy and minister of investment and state enterprises
respectively.
Abdurrahman dismissed Laksamana in April last year on
corruption charges that were never taken to court.
Kwik gave way to Rizal Ramli, when he resigned in August
over the former president's plan to reshuffle his Cabinet.
Kwik, a noted economist, was known as a weak administrator,
but his integrity earned him Abdurrahman's praise for being an
honest and hardworking man.
Both Kwik and Laksamana have been Megawati's closest aides on
economic affairs and their ouster had marked the first blow to
Abdurrahman's alliance with then vice president Megawati.
"I think their return would bring a positive impact to the
market," Feri continued.
He added market talks also included the return of former
finance minister Bambang Sudibyo, who was ousted in the August
reshuffle last year.
Bambang entered the Cabinet to appease the Axis Force, a loose
coalition of Islamic parties, to whom Abdurrahman owed much for
his presidency.
"There isn't much concern over the non-economic posts in the
Cabinet, the market is largely indifferent to who will sit in
these posts," Feri continued.
He said the recent Cabinet rumors eased some of the fear that
political horse-trading would stifle economic reform.
Economists have argued that the ongoing political instability
under Abdurrahman's 20-month rule is behind Indonesia's slow-
paced economic recovery.
Feri said to accelerate recovery, the new Cabinet should focus
on the budget deficit, debt restructuring and the International
Monetary Fund (IMF).
If the new economic team fell in line with market
expectations, he said, the rupiah could rise to 9,800 to the U.S.
dollar.
Relieved by the peaceful elevation of Megawati to the
presidency, the market took profits on the dollar in last week's
trading.
After hitting a four-month high last Monday, the rupiah closed
lower at 10,000 on Friday, yet far above the previous week's
11,148.
Corporate demand for the dollar would cap any further gains,
as some US$2.5 billion in foreign debts would mature in
September, Feri added.
He said, at 10,000, the rupiah was already too tempting for
companies.
"I expect trading next week to range between 9,800 and
10,000," he said, noting that the present thin market would make
the rupiah vulnerable to the slightest rise in corporate demand.
Separately, stock analyst Adrian Rusmana at PT BNI Securities
said the market was expecting several members of Abdurrahman's
first economic team to return.
"As in the first Cabinet of Gus Dur, the next one is aimed at
making everybody happy," Adrian said, referring to the former
president by his more popular nickname.
Some believe Abdurrahman's frequent reshuffling of his Cabinet
had undermined the political support necessary for his government
to survive.
Adrian said the stock index could rise to around 450 to 460 on
news of a politically strong government with a competent economic
team.
According to him, the market was already undervalued as many
had taken profit from Megawati's presidency last Monday.
Stock investors had long bet on her presidency, which Adrian
said was evident in the stock market's past three-month rise.
"Now, some blue chip companies are oversold, they're poised to
get stronger," he said, citing shares of telecommunication,
retail firms and cigarette producers.
He said the undervalued market, coupled with the confidence of
a solid economic team was sure to send the stock index
rebounding.
On last week's trading, the Jakarta Stock Exchange (JSX)
Composite Index fell to 447.38 from 460.91 the week before.