Investors play it safe over political disquiet

JAKARTA (JP): Trading activities on the local bourse are likely to remain dormant this week as investors play it safe over the country's political uncertainties, securities analysts said.

Head of research of Pentasena Securities Mohammad Syahrial said that investors continued to fret over the nation's latest political situation, as many students were still unhappy with B.J. Habibie's appointment as the country's third president.

"Students feel that he is not appropriate to lead the country because he is the product of the old system."

Habibie was sworn in as the country's third president on Thursday last week following Soeharto's resignation after 32 years in power.

Syahrial said the political situation had improved within the last several days but investors still felt uncertain about what would happen in the coming days.

Investors, for the time being, would keep a wait-and-see stance, he added.

"It is not that easy for foreign investors to put their funds here until they are sure the country's political situation is stable."

Due to that, he said, trading activities in the local financial market would be stagnant this week.

Head of research of Mashill Jaya Securities Tjandra Kartika agreed, saying that stock prices in the local market would remain turbulent in the medium and long terms as foreign funds managers were reluctant to put their funds here for political reasons.

Other analysts said that President Habibie's new cabinet lineup -- announced Friday and sworn-in Saturday -- appeared to have credible personnel, especially on the economic and finance side, but the financial market seemed to have expected more evidence that political reforms would be pursued.

"Though the market is rejoiced by Soeharto's resignation, it expects President Habibie to pursue political reforms as demanded by students and opposition leaders," Syahrial said.

But Baradita Katopo, an analyst of Usaha Bersama Securities, said the newly installed Cabinet had yet to properly address the economic problems including the country's mounting private corporate debt and restoration of investor confidence in the country's dire economy.

"The market wants the government to make clear-cut measures to address the country's economic and political problems."

Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita said yesterday the new government had received support from the International Monetary Fund (IMF) and Indonesia's main donor countries such as the United States and Japan.

"The economic team in the new Cabinet is still committed to the reform program agreed to with the IMF," he said. He hoped the disbursement of the next tranche in the IMF loan would be made according to the original schedule.

Analysts said the loan-package brokered by the IMF would be a key factor in the recovery of investor confidence in the country.

The IMF, spearheading a US$43 billion bailout package to Indonesia, is to send a high-level team here this week to assess current conditions.

"The disbursement of the IMF loan will depend heavily on whether Indonesia implements thorough political and economic reforms," one analyst said.

The JSX composite index rose 10.06 percent, or 40.79 points, to 445.14 points last week from 405.14 the previous week.

Total average daily turnover declined by 57 percent, to 110.92 million shares changing hands last week from 261.92 million shares the previous week.

Total average daily transaction value declined to Rp 107.10 billion ($10.52 million) last week from Rp 277.35 billion the previous week.

Most blue-chip stocks rose last week. Astra International, the country's largest automaker, climbed by Rp 100 to Rp 1,150, cigarette-maker Gudang Garam by Rp 1,475 to Rp 8,750, HM Sampoerna by Rp 575 to Rp 4,300, Telkom by Rp 325 to Rp 3,825 and Indosat by Rp 3,200 to Rp 15,300. (aly)