Govt's banking move casts shadow on stock trading
JAKARTA (JP): The government's move to freeze the operation of seven commercial banks, and to take over the management of seven others, is likely to cast a shadow on trading activities in the Jakarta Stock Exchange (JSX) this week, stockbrokers and analysts have said.
They said positive results from talks between the Indonesian government and the International Monetary Fund (IMF), which were expected to lift investors' sentiment, had been discounted and would not, therefore, lure investors to enter the local exchange.
"The suspension of the seven banks and the supervision of seven others, mostly listed ones, into the receivership of IBRA will prevent investors from entering the market despite positive news from talks between the IMF and the government," an analyst with a joint-venture securities firm said.
Minister of Finance Fuad Bawazier announced Saturday the suspension of seven commercial banks and the placing of another seven under the management of the Indonesian Bank Restructuring Agency (IBRA).
The seven suspended banks are Bank Kredit Asia, Centris International Bank, Deka Bank, Bank Subentra, Bank Pelita, Hokindo Bank and publicly listed Bank Surya.
Banks under the management control of IBRA are Bank Danamon, Bank Dagang Nasional Indonesia (BDNI), Bank Umum Nasional (BUN), Bank PDFCI, Bank Modern Bank Tiara Asia -- all listed banks -- and state Bank Ekspor-Impor Indonesia (Bank Exim).
Stock analysts said that government's new move would force most investors to dump their portfolios on banking stocks for fear that these banks might close down their operations in the coming months.
"I think the banking stocks will be the hardest hit by the news because most investors will make major selling off on these stocks this week," an analyst said.
Head of equities of Bahana Securities Bruce Rolph said that most investors would be forced to switch their portfolios from these banks to more fundamentally strong ones like bank BNI, Bank Lippo or Bank Bali.
"Sound banks will benefit from the government's new move to create a better banking system," he told The Jakarta Post.
Research director of Mashill Jaya Securities, Tjandra Kartika, shared Rolph's view, saying that the government's new move was part of the country's effort the improve its wrecked banking system.
"The market should perceive the government's new move as part of the efforts to heal the country's banking system," Mashill's Tjandra said.
Some stock analysts predicted that some investors would continue to select value stocks for their investment vehicles as investing in the banking industry was getting riskier now despite the government's guarantee.
Lackluster
Stockbrokers predicted trading activities on the local exchange would remain lackluster because most investors would shun the market for some time, until the government credibly implemented all points in the new agreement with the IMF, expected to be signed this week.
The JSX Composite Index fell 8.12 points last week to close at 533.30 from 542.09 points the previous week.
Daily turnover for the four trading day -- closed Tuesday for the end of the 1997/1998 fiscal year -- averaged 549.45 million shares changing hand on the regular market, compared to 826.30 million the previous week.
Daily transaction value was Rp 639.02 billion (US$75.17 million) last week compared to Rp 915.75 billion the previous week.
The bourse will be closed tomorrow in observation of Idul Adha and on Friday April 10 for Good Friday.
Most blue chip stocks ended lower last week with state telecommunications firm PT Telkom falling by Rp 350 to Rp 3,900, satellite operator Indosat by Rp 200 to Rp 13,400, cigarettemaker Sampoerna by Rp 500 to Rp 7,500 while its competitor Gudang Garam fell by Rp 700 to Rp 11,200.
Sound listed banks ended higher last week, with Bank Internasional Indonesia rising by Rp 100 to Rp 800, Bank Negara Indonesia (BNI) by Rp 50 to Rp 600. (aly)