Financial market give cool response to IMF package

Financial market give cool response to IMF package

JAKARTA (JP): Indonesia's financial market responded coolly
yesterday to the long-waited approval for the disbursement of the
International Monetary Fund's second US$1 billion tranche to
Indonesia.

Securities analysts said the approval for the release of the
IMF-brokered bailout fund was overshadowed by news of sporadic
riots in several parts of the country.

The news of the IMF's loan disbursement should have generated
more confidence in the country's battered economy because only
with such a facility can Indonesia overcome its financial
problems.

"But the reality is different. Investors ignore the IMF's move
as they are more concerned about the escalating political
tension," one analyst said.

Fadjar Limin Sutandi, the head of research of Sigma Batara
Securities, said that the heated political situation undermined
the positive signal from the IMF.

University students in the country's major cities have staged
demonstrations almost daily, urging the government to cut
skyrocketing prices and introduce major economic and political
reforms.

Demonstrations in several cities, especially in the North
Sumatra city of Medan, have turned into rioting, not only
involving students but also other segments of society.

The government increased fuel prices by between 25 percent and
71.43 percent and electricity rates by 20 percent yesterday to
reduce subsidies and control the state budget deficit.

Brokers said that investors feared the hikes in power rates
and fuel prices, which has resulted in substantial increases in
public transportation fares, would ignite more riots.

"Clashes and violence between students and security officers
scare away foreign investors," a chief broker with WI Carr
Indonesia Securities said.

Stock brokers said that stock prices on the Jakarta Stock
Exchange (JSX) tumbled 2.42 percent yesterday.

The chief broker also said most foreign brokerage firms stayed
mostly on the selling side for the whole trading day yesterday as
most foreign investors unloaded their blue chip stocks.

The broker said that large-capitalized stock like Astra
International, Indosat, Tambang Timah, telecommunication firm PT
Telkom and giant conglomerate fell yesterday.

The stock prices of the country's largest automaker, Astra
International, shed Rp 200 to Rp 1,275, Indosat slid Rp 25 to Rp
10,900, Tambang Timah fell Rp 375 to Rp 5,725, PT Telkom fell Rp
125 to Rp 3,000 and Bimantara Citra fell Rp 75 to Rp 825.

The JSX composite index ended 2.42 percent or 10.83 points
lower yesterday to 435.16 points on a total turnover of 333.31
million shares worth Rp 329.99 billion (US$41.28 million).

Sigma Batara's Fadjar said the country's market was predicted
to fall further in the days ahead as political tension would
continue to hamper the country.

"With more negative news flooding into the market, the main
price index might fall to as low as a 350 point level," he said.

While stock prices declined, the rupiah in the currency market
closed at 8,000 to the U.S. dollar yesterday, slightly lower than
its close at 7,950 the previous day, currency dealers said.

They said people in the currency market did not respond
positively to the release of the IMF tranche as the country was
plagued by many problems, such as mounting private sector debt.

"Though the release of the IMF tranche is good, there has not
been any solution yet to resolving the country's private sector
debt," a chief dealer with a local private bank said. (aly)