IDB to support Indonesian stock markets
JAKARTA (JP): The Islamic Development Bank (IDB) and commercial banks from some Islamic countries have committed to support Indonesia's stock markets by picking up some undervalued, but quality stocks.
IDB portfolio director B.M. Qureshy, who led a group of commercial bankers from Kuwait, Qatar, Sudan, Bahrain and Malaysia on a visit here, said yesterday he believed that Indonesia's fundamentals remained strong.
"The current stock market turbulence is caused more by market sentiments than fundamentals. This is an opportunity to get in an opportunity where we can get very good value in this stock market," Qureshy said after meeting with Minister of Finance Mar'ie Muhammad.
Mar'ie said the visit by IDB officials and executives of commercial banks from Islamic countries was a follow-up of an agreement between them and the minister during an IDB meeting in Damascus last month.
At that meeting, it was agreed that IDB and some commercial banks would help Indonesia get out of the current crisis by investing in Indonesian stocks.
"They see our fundamentals as sound and believe that the current stock market turmoil is only temporary," Mar'ie said.
"I said there were many undervalued but quality stocks. Their prices have happened to drop. But for people with long-term perspectives, this is the time to buy," he added.
A source with a state-owned securities house said that initially the IDB and commercial banks would pool funds totaling US$100 million to invest in local stock markets.
He said as they the carried the Islamic banner, they would only buy stocks which would benefit the Moslem community at large, not stocks of companies producing beer, for instance.
After meeting with Mar'ie, the delegation visited the Jakarta Stock Exchange's trading floor.
Share prices on the exchange gained 3.3 percent, with the composite index closing up 12.3 points at 368.68.
Trading turnover totaled 734 million shares on the regular market valued at Rp 984.44 billion ($182.3 million).
Stock analysts said fading worries over President Soeharto's health and news about plans from the IDB to buy local stocks had encouraged investors to reenter the market.
"Such positive news gives domestic investors time to buy certain selective stocks of companies with good fundamentals," managing director of Harita Securities Christina Lim said.
However, another analyst with a joint venture securities firm said most foreign investors were still greatly concerned about the President's health and political atmosphere in the country.
"Most foreign investors do not feel comfortable with the political uncertainty in this country and the leadership crisis," the analyst, who asked not to be identified, said.
In the currency market, the rupiah stabilized against the U.S. dollar yesterday on Bank Indonesia's intervention, dealers said.
They said the rupiah weakened to as low as 5,900 in the morning session driven by Singapore operators, prompting the central bank to step in the market to prevent the rupiah from declining further.
"The central bank intervened at the 5,600 level yesterday allowing the rupiah to recover to Rp 5,450," a local private bank chief dealer said.
The spot rupiah closed at 5,450/5,850 compared with the opening of 5,500/5,750.
But dealers said volume remained thin with total transactions worth about $100 million yesterday.
"Basically the volume is small. But stability is still fragile because people are now waiting for news from the government," the chief dealer said. (aly/rid)