Gloomy outlook expected to overshadow trading

JAKARTA (JP): Trading activities on the country's battered stock market are expected to slow down this week despite positive news on the resumption of international loans to Indonesia, stock analysts and brokers said over the weekend.

They said loans from multilateral financial institutions like the World Bank, though positive in nature, would not be able to lift investors confidence in the country's economy at this point of time.

ING Barings Securities' head of research Tom Inglish predicted that trading activities on the local market would be quite sluggish this week after a strong rally last week.

"The movement of the Japanese yen will continue to lead the movement of the local market in the short term," he said.

An analyst with a local securities house agreed and said domestic factors still had a negative effect on the market as the economic crisis had affected almost all aspects of people's lives.

"Indonesia is facing not only an economic crisis but political and social problems as well. It needs a huge move to address all of them," the analyst said.

He said the commitment from the World Bank to disburse a US$1 billion structural loan to Indonesia would be far from enough to revive the battered market.

"They (multilateral financial institutions) have lost momentum in helping Indonesia because the country is already on the brink of collapse," he said.

Reports said the World Bank had approved a $1 billion structural adjustment loan as part of the $43 billion bailout package arranged by the International Monetary Fund (IMF) to help heal the country's dire economy.

The World Bank and the Group of Seven of industrial countries are expected to announce soon new loans worth $6 billion to supplement the existing package.

Head of research of Mashill Jaya Securities Tjandra Kartika said the news would not be strong enough to rally the market.

Tjandra said political and social uncertainties at home, worsened by an increase in the number of poor people and escalating unemployment, would counteract any positive news in the market.

He pointed out that unresolved social and political problems would continue to prevent offshore funds from entering here.

Bahana Securities' associate director and head of institutional sales, Andre Cita, said political and social stability would be the key factor for trading activities on the local market.

"If the situation remains stable and there is no major demonstrations and no much backlash in terms of the situation in Irian Jaya and East Timor, the market will continue to show its strength," he said.

Reports said last week that at least one person was killed and two were badly injured in a clash between rioters and security officers in Irian Jaya following a tense situation in East Timor.

There were also some sporadic protests staged in several parts of Jakarta last week, demanding that the government root out corruption, nepotism and collusion.

Despite all this, Tjandra and Cita said some short-term investors, who had long sidelined the local market, would return to the local exchange to benefit from cheap stocks.

Some brokers said that although the country's long-term outlook remain bearish, news of the presence of Mexico's Cemex SA de CV to purchase 35 percent of the government's 65 percent stake in cementmaker PT Semen Gresik would trigger active trading on the local bourse at the beginning of this week.

Trading in Semen Gresik stock, which was suspended on Wednesday, will resume today.

The Mexican cementmaker offered to buy Semen Gresik shares at $1.38 per share from the government and the public.

"News on Cemex will prompt investors to make massive buys before Semen Gresik's shares rise higher," a dealer with a local securities house said.

The JSX Composite index rose 9 percent to 470.54 points last week from 430.87 the previous week.

Daily average turnover was about 340.22 million shares last week compared to 182.97 million the previous week.

Daily average transaction value rose to Rp 310.54 billion (US$21.4 million) last week compared to Rp 161.39 billion the previous week.

Meanwhile, the rupiah closed at 14,550 to the U.S. dollar last week compared to its close at 14,800 the previous week. (aly)