Local shares plunge as political fears grow

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)