Local shares plunge as political fears grow

JAKARTA (JP): Share prices on the local stock exchange plunged by over 4 percent yesterday amid mounting concern over the political atmosphere in the country, brokers said.

Securities brokers said yesterday that the escalating student protests in all of the country's major cities posed a major concern to the market.

Investors dumped their shares on fears that the demonstrations, which have been a common occurrence in major cities over the last few weeks, could turn into "political street violence" in the near future.

"There are no offshore fund mangers who are going to put their funds into a market with a high political risk," a broker with Trimegah Securities said referring to the widespread student demonstrations.

Thousands of university students in Medan, North Sumatra; Yogyakarta; Solo and Purwokerto in Central Java; and Jakarta continued demonstrating yesterday and urged the government to lead the country out of its worst crisis in decades.

Police reportedly used tear gas to disperse stone-throwing students in Medan.

The broker from Trimegah said that foreign brokerage firms, including ING Barings Securities, Jardine Fleming Nusantara, HSBC, Merrill Lynch Indonesia and GK GOH Ometraco, had been the main sellers on yesterday's depressed market.

Blue-chip stocks

She said that certain selected blue-chip stocks like Astra International, Gudang Garam, HM Sampoerna, Indosat, PT Telkom and Tambang Timah ended trading lower yesterday.

"Most foreign brokerage firms were selling for the whole trading day yesterday," she said.

Astra's stock price descended Rp 100 to Rp 1,625 on a total turnover of 8.36 shares, Gudang Garam fell Rp 400 to Rp 10,000 on one million shares, HM Sampoerna slid Rp 325 to Rp 5,600 on 1.02 million shares, Indosat dropped Rp 450 to Rp 11,950 on 927,500 shares, Tambang Timah slid Rp 125 to Rp 6,875 on 84,500 shares and Telkom slid Rp 250 to Rp 3,150 on 12.--- shares.

The JSX Composite index fell 4.2 percent (20.39 points) to 465.27 points yesterday on a total turnover of 431.07 million shares worth Rp 596.98 billion (US$73.58 million).

Brokers also blamed the lackluster trading activities on poor corporate earnings and the possibility of a further delay in disbursement of the second tranche of funds brokered by the International Monetary Fund (IMF) worth US$3 billion.

Brokers said that overseas and domestic fund managers had expressed worries that the IMF would not release the second tranche because the government was still not serious about implementing the package of reforms agreed in exchange for the loans.

"Overseas funds perceive that certain politically well connected business groups still retain certain privileges," a chief broker from Usaha Bersama Securities said in reference to PT Kembang Cengkeh Nasional (KCN), a company controlled by President Soeharto's youngest son Hutomo Mandala Putra which has recently gained a monopoly hold on the clove trade, the main ingredient in locally produced cigarettes.

The monopoly was previously held by the Clove Marketing and Buffer Stock Agency (BPPC), which was also controlled by Hutomo, commonly known as Tommy.

"There is no positive news on the market. Investors are just desperate to see an end to such practices," he said.

Brokers said that although the IMF board would meet in Washington on May 4 to discuss disbursement of the $3 billion loan to Indonesia, investors were skeptical that the release of the funds would go ahead on time.

Adding to the prevailing negative sentiment, brokers partially attributed stock price declines to market fears that the central bank would further increase interest rates on short-term promissory notes (SBIs), and the weak state markets around Southeast Asia.

"The SBI rate increases will encourage most local investors to retain their funds in time deposits," an analyst with a local securities firm said.

Mirroring stock prices, the rupiah also ended yesterday in a weaker position against the U.S. dollar after a quiet day of trading, dealers said.

The spot rupiah rate closed at 8,100 to the American dollar in response to fears that the IMF would not release bail-out funds to Indonesia and that the political climate would continue to deteriorate. (aly)