Local share prices fall to 17 month low

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) plunged seven percent on Monday as trading reopened after last week's bomb blast at the bourse.

Securities dealers said that share prices dived across the board amid uncertainty over the country's security situation, pushing down the JSX Composite Index to a 17-month low at 411.03 -- a seven percent drop on Wednesday's close.

The rupiah, however, closed slightly higher at Rp 8,655 against the U.S. dollar as compared to Rp 8,685 on Friday despite the drastic fall on the stock market.

Coordinating Minister for the Economy Rizal Ramli said the plunge was only temporary. "We're optimistic that stock trading will revive soon," Rizal said after witnessing the resumption of trading.

Minister of Finance Prijadi Praptosuhardjo and Minister of Industry and Trade Luhut Pandjaitan were also present at the start of trading at a heavily guarded JSX building.

Trading was stopped on Wednesday when a bomb exploded in the bourse's parking lot, killing at least 11 people.

Rizal said that the government would soon privatize state enterprises and sell their assets under the Indonesian Bank Restructuring Agency (IBRA) to help boost the market.

"We need to introduce new shares that attract investors," Rizal said, adding that he had asked IBRA chief and Junior Minister for the Restructuring of the National Economy Cacuk Sudarijanto to start selling IBRA's assets.

Securities dealers said that selling pressure took place throughout almost the whole morning session, pushing down prices of most blue chip shares.

"Local investors panicked, foreign investors also panicked, everyone let go of their shares," a dealer at a local brokerage company said.

Trading recovered slightly in the afternoon and some stocks managed to gain ground, but overall market sentiment remained week, dealers said.

Jasso Winarto, a senior analyst at PT Sigma Research, said although the drop was felt by almost all companies, the index fell largely because foreign investors sold their blue chip stakes.

"Merrill Lynch sold Rp 60 billion worth of blue chip stocks, Credit Lyonnais sold Rp 38 billion and SG 49 billion," he told The Jakarta Post.

He said foreign investors' selling could continue until next week. By then, Jasso said, the market index might reach 375.

"The word is that they (foreign investors) will keep selling until they reach $67 million," Jasso said, quoting market rumors.

He said that too much bad news hit Monday trading.

The sudden replacement of National Police chief Lt. Gen. Rusdihardjo by President Abdurrahman Wahid also affected the market. Investors considered it interference in the law, rather than an act of pressure to resolve the bombing, Jasso said.

U.S. Defense Secretary William Cohen's statement that Indonesia risked international isolation if it failed to disarm Timorese militias was another blow, he added.

Cohen was in Jakarta for a one-day visit.

The U.S. and the United Nations have demanded Indonesia disarm Timorese militias, after they allegedly killed three UN aid workers in Atambua, West Timor.

"What investors fear most from the Atambua incident is international isolation," Jasso said.

Stock analyst Budi Ruseno H.P. of PT Bhakti Investama also attributed panic selling for the year's record low performance at the JSX.

But he added that external factors had also played their part, in particular investors' anticipation of the U.S. Federal Reserve raising its interest rates. (bkm)