Jihad calls send markets another negative signal

Jihad calls send markets another negative signal

JAKARTA (JP): A new wave of negative sentiment could hit the
financial market this week as jihad calls to defend President
Abdurrahman "Gus Dur" Wahid intensifies.

Analysts say investors are concerned that Gus Dur's supporters
will enter the capital and clash with his opponents.

This scenario will confirm investors' fear of political
tensions seeping to the grassroots level, and crippling the
country's fragile economy, the analysts said over the weekend.

"The market is watching carefully NU's (Nahdlatul Ulama)
stance on this issue," said stock analyst Jasso Winarto of PT
Sigma Research.

Tens of thousands of people, believed to be members of NU,
which is the country's largest Muslim organization that was
chaired by Gus Dur for 15 years, have registered to join a jihad
(a holy war)against the President's political enemies.

Gus Dur's bitter relations with legislators have taken a turn
for the worse as the latter seeks to unseat the President through
an impeachment process.

Although NU executives have called on their followers to
abandon the jihad calls, they fell short of officially banning
such activities.

Last week, National Awakening Party (PKB), a party cofounded
by Gus Dur, registered over 20,000 people willing to die for Gus
Dur. The party said it would continue to accommodate Gus Dur's
fanatic supporters until NU said otherwise.

Jasso said investors were not confident that Gus Dur would
prevent his supporters from storming into Jakarta, considering
his so far halfhearted effort to stop them.

Jasso said he thought NU's official position on the jihad
calls would be clear after the completion of its executives'
meeting last Sunday.

However, he added, NU was still silent about bughot, an
Islamic term for rebellion under which killing of political
enemies was justified.

"If NU's bughot includes the legislators who are exercising
their democratic rights against the President, the market will
dispose of shares for sure," he said.

"The market will see this (bughot) as an act of terrorism
against democracy," he added.

Jasso said fears of Gus Dur's supporters, who were prepared to
fight to death, had even eclipsed positive signals brought by the
arrival of the International Monetary Fund's (IMF) review team in
Jakarta.

The team's review over the current reforms' progress is vital
for the release of a US$400 million tranche, which has been
withheld since last December due to Indonesia's slow reform pace.

Indonesia needs the IMF's loan to help it cope with a larger
than expected state budget deficit, triggered by the rupiah's
sharp fall against the U.S dollar.

But Jasso said the market was not expecting the IMF to
disburse the tranche any time soon.

"Disbursement of the tranche also hinges on the outcome of the
amendment of the central bank law for which we don't even have a
clear schedule," he explained.

Stock analyst Martin Pangabean at Bank Mandiri estimated
trading to end flat or lower this week.

"At present the mood here is still dominated by the U.S
dollar's movements. Market sentiments tend to be more negative
than flat," he said.

The weakening rupiah has been dragging down the stock market
as investors unload shares of companies vulnerable to foreign
exchange losses.

According Martin, political pressure from talks of jihad by
Gus Dur's supporters can also weigh on the index.

Trading last week, which was cut short by a public holiday on
Friday, brought the index only slightly higher to 365.98 from
365.24 in the previous week.

A currency analyst at a local securities firm, Farial Anwar,
said the rupiah was up for more political pressure, ahead of the
possible issuance of the House of Representatives' second
memorandum against President Abdurrahman.

The rupiah gained ground last week when it ended, on Thursday,
at 10,580 to the greenback, compared to the 10,875 in the
previous week.

"Last week we've seen political tension somewhat relaxing, but
I don't think it will last long with the second memorandum on its
way, and the calls for jihad growing," he said.

Talks abound that legislators will issue a second memorandum
against the President this month, after Gus Dur's disappointing
response to the first memorandum of censure issued on February 1.

The censure followed the House's investigation into two
financial scandals which implicated the President.

Gus Dur has so far stood his ground by proclaiming his
innocence in both scandals.

Farial said the market was bracing for more political
maneuvers in the two weeks ahead of the possible issuance of a
second memorandum.

"Anything can happen in the two weeks, politics during that
period can be very volatile," he said.

But he said chances were slim that the rupiah will fall below
the 11,000 level, unless Gus Dur's supporters entered the capital
and clashed with his opponents.

He predicted the rupiah to trade between 10,500 and 10,800
against the greenback.

Farial warned that Bank Indonesia's current instruments were
losing its impact in a market infested with speculators.

According to him, Bank Indonesia's limited intervention
ability is no longer effective to fence off speculative attacks
on the local unit. (bkm)