Fresh aid commitment may do little to the market
Fresh aid commitment may do little to the market
JAKARTA (JP): Huge new loans pledged by countries grouped in
the Consultative Group on Indonesian (CGI) during a meeting in
Paris last week are not expected to boost trading on the local
stock market this week, securities analysts have said.
The analysts said that bullish sentiment centered around the
outcome of the Paris meeting arose because the market anticipated
an outcome favorable to the country. The CGI pledged to provide
Indonesia with fresh aid worth US$7.9 billion late last Thursday.
"Positive sentiment focusing on the outcome of the CGI meeting
arose several days before the new aid commitment was announced.
It's all over now," the head of research at Vickers Ballas
Tamara, Noraya Soewarno, said.
She predicted that the local stock market would return to the
rumor-driven trading by which it has been characterized
throughout the crisis because most listed companies remain
fundamentally weak.
"The CGI aid has been the only positive news on the market for
a long time," she said.
She said that trading would remain sluggish because foreign
investors were still afraid of placing their funds in the country
while a risk of further unrest remained.
"Private capital is still shunning Indonesia because of fears
of a further outbreak of social and political unrest," she said.
Head of research at Trimegah Securities David Chang shared
Noraya's view, saying the aid package alone would not be enough
to improve the country's hemorrhaging economy.
He said government efforts to restore investor confidence in
the country had not done enough to attract foreign capital back
into the country.
"The CGI aid will only improve sentiment on the country's
financial market for a short period of time," he said, pointing
out that long term prospects for the country's economy were still
gloomy.
Stocks brokers also predicted that more rumor-driven trading
would dominate the market this week, with capitalized stocks
becoming investors' prime targets.
"Stocks in Telkom and Indosat will have a significant effect
on the main price index," a broker with Mashill Jaya Securities
said.
Telkom and Indosat, which are also listed on the New York
Stock Exchange, account for 25 percent of the total market
capitalization on the Jakarta bourse. Movement in the share price
of either company can have a strong influence on the price index.
The JSX composite index edged up 2.15 points to 481.71 last
week from 479.56 the previous week
Daily average turnover declined 20 percent -- 247.74 million
shares changed hands last week compared to 311.76 million shares
in the previous week.
The average daily transaction value fell 21 percent to Rp
333.93 billion (US$25.68 million) last week from Rp 426.73
billion in the previous week.
Analysts said that movement in the beleaguered rupiah would
also have a major influence on this week's stock market
activities.
The rupiah closed at 13,100 against the U.S. dollar on Friday,
much stronger than the previous week's close of 14,000.
Foreign exchange analysts predicted that the CGI aid package
would have a positive impact on the ailing rupiah because a
larger part of the money pledged would be disbursement in the
near future. The flow of foreign currency into the country would
therefore rise substantially over the next few months and
increase foreign exchange reserves, they said.
"With the increase in foreign reserves, importers will feel
more secure because they know dollars will be available whenever
they need them," one analyst said. "This will make them hang onto
their rupiah for much longer and the result will be that they
will have more confidence in their national currency." he said.
(aly)