Investors likely to stay away from the market

JAKARTA (JP): Analysts predicted share prices on the Jakarta Stock Exchange (JSX) would lose ground this week in the wake of President Abdurrahman Wahid's decision on Sunday to retain Gen. Wiranto as coordinating minister for security and political affairs.

The anticlimactic ending of the standoff between the two will be received negatively by the local stock market, the analysts said.

"Gus Dur's decision to retain Wiranto in the Cabinet creates more uncertainty in the market," said Martin Panggabean, chief economist at Bank Mandiri, referring to the President by his nickname.

Martin said that although Abdurrahman's decision on Wiranto was legally correct, the market would view it differently. According to him, the market would see the move as proof of strong pressure on Abdurrahman to retain Wiranto.

Equity analyst Dandosi Matram shared Martin's opinion, saying the President's decision to retain Wiranto would keep investors away from the market.

"Investors will stay away for some time until everything (pertaining to Wiranto) is cleared," he said.

Abdurrahman on Sunday reversed his earlier demand that Wiranto resign his post, agreeing to keep the general in his Cabinet until the Attorney General's Office completed its investigation into the violence in East Timor.

The President, however, denied his decision was a compromise, even as analysts said the move dealt a blow to Abdurrahman's credibility.

Abdurrahman said Wiranto must resign if the investigation by the Attorney General's Office implicated him in the post-ballot violence in East Timor last year.

Aside from the Abdurrahman-Wiranto stalemate, Dandosi said investors, particularly foreign investors, continued to be of the opinion that Indonesian politics was unpredictable, at least in the medium term.

If the political elite continue with their infighting, that will also increase the possibility of political instability, he added.

"The Abdurrahman-Wiranto crisis might be over, but investors are still anxious about how things will develop thereafter. Is there another crisis coming soon," he said.

Dandosi said foreign investors would likely become net sellers this week, and the JSX Composite Index would likely fall because of Abdurrahman's decision to retain Wiranto in the Cabinet.

The rupiah, Dandosi said, would also be under pressure. However, he said the disbursement of loans by the Consultative Group on Indonesia and the International Monetary Fund would help defend the rupiah.

He said there was an external factor besides politics which would prevent the rupiah from returning to the 6,000 level against the greenback.

"Political factors are not alone in burdening the rupiah. The impact of the U.S. government raising its interest rates is also an accountable burden," he said.

The JSX Composite Index advanced slightly last week to close at 635.07 points, up from 634.99 the previous week.

The daily average transaction value rose to Rp 1.04 trillion last week, compared to Rp 724.88 billion the previous week.

The daily average turnover also increased to Rp 1.14 billion shares last week from 614.2 million shares the previous week.

Last week's top gainers were PT Concord Benefit Enterprises, whose shares jumped 239.13 percent, PT Prima Alloy Steel (61.11 percent) and PT Mandiri Intifinance, which rose 55 percent.

The week's big losers were PT Transindo Multi Prima, whose shares fell by 34.62 percent, PT Suba Indah (19.51 percent) and PT Super Mitori Utama, which experienced an 18.18 percent tumble.

The top brokerage firms by transaction value were PT Danareksa Sekuritas with Rp 454.31 billion in transactions, PT Trimegah Securindolestari (376.03 billion) and PT Asjaya Indosurya Securities with Rp 365.85 billion in transactions.

The rupiah appreciated by 3.1 percent to close the week at 7,288 to the U.S. dollar. (udi/rid)