Investors begin to sort Indonesia shares

Investors begin to sort Indonesia shares

Edhi Pranasidhi
Dow Jones/Jakarta

Investors are buying shares in Indonesian cement, heavy-equipment
and infrastructure-related firms on the expectation those
companies will be employed to rebuild the devastated province of
Aceh, and analysts expect the trend to continue.

Pharmaceutical shares are also gaining, while financial shares
have weakened as banks detail their loan exposure to the stricken
region.

The signals from investors are emerging although the size of
the human and material costs to Aceh -- close to the epicenter of
the Dec. 26 earthquake and tsunami that killed an estimated
139,000 people in 11 countries -- may never be quantified.

Huge sums of government and international-donor funds will be
needed to revive the area.

Shares in related companies are rising as a result.

"The reconstruction and rebuilding efforts in Aceh province
should boost cement demand, and job orders for infrastructure-
related companies," said the head of Macquarie Securities'
research department, Laksono Widodo.

Indeed, shares in Semen Gresik, the nation's largest cement
maker by output, have risen 14 percent since the first trading
day after the disaster, based on Monday's close. Gresik's rival,
Indocement Tunggal Prakarsa, has recorded a share-price rise of
25 percent over the period, while shares in Semen Cibinong have
risen 11 percent.

The share price of majority-state-owned construction firm Adhi
Karya has added 26 percent, while heavy equipment companies
Komatsu Indonesia and United Tractors have risen 4.8 percent and
3 percent, respectively, since Dec. 26.

"Adhi Karya, for instance, specializes in building bridges and
roads which are much needed to rebuild Aceh," Laksono said.

The government will likely spend Rp 10 trillion ($1.07
billion) for reconstruction in the province over the next five
years. It has also said it hopes the World Bank and the Asian
Development Bank will redirect up to $3 billion in currently
"unproductive or undisbursed" country loans to support the
rebuilding effort.

Finance Minister Yusuf Anwar on Monday said the government
will seek international debt rescheduling from the Paris Club of
international donors, which would help free up additional
official funds to rebuild Aceh.

Indonesia will likely also get international pledges of
financial support for Aceh's rehabilitation at an international
relief summit on Thursday in Jakarta.

Meanwhile, antibiotics, anti-diarrhea formulas and other basic
medicines are needed to stave off potential disease epidemics
among Aceh's survivors.

Indonesia's government last week pledged $150 million in
emergency relief, including medical services, for Aceh.
International humanitarian organizations are spreading out across
Aceh to deliver emergency aid to survivors.

Analysts expect pharmaceutical companies like Kalbe Farma,
majority-state-owned Indo Farma and Darya Varia Laboratoria, and
Dankos Laboratories to benefit immediately and over the full
year.

For example, Mohammad Reza, head of research at Kuo Capital
Securities, said his firm has upgraded its rating on local drug
stocks to 'buy' from 'hold.'

Indonesia's listed banks, however, have had their branch
networks in Aceh destroyed and are likely to see a surge in
nonperforming loans due to high numbers of bank borrowers among
the dead. Investors are already exiting these stocks.

PT Bank Rakyat Indonesia is likely to incur losses due $251
billion loans outstanding in areas hit by the tsunami, Jakarta-
based Kim Eng Securities said in a research note Monday.

BRI, which primarily services Indonesia's microfinance and
small business sectors, has three branches, one sub-branch and 46
smaller offices in three of the country's worst tsunami-stricken
areas.

"The (estimated tsunami-related loss) figure is 7 percent of
our forecast 2005 net profit of Rp 3.44 trillion" for Bank
Rakyat, said Kim Eng Securities.

The bank's shares lost 3.5 percent in afternoon trade on
Monday.

Bank Negara Indonesia also expects an impact.

"We estimate we'll book around Rp 10.7 billion (in losses) in
terms of fixed assets in Aceh," said BNI President Sigit Pramono,
who added that the bank's Aceh and Meulaboh branches were badly
damaged by the tidal waves.

He said the bank will face additional potential losses, as it
has around Rp 553 billion in loans in the devastated areas.

BNI's shares have dropped 6.3 percent over the previous four
sessions.