Local stock market gives cool response to new Cabinet lineup

Local stock market gives cool response to new Cabinet lineup

JAKARTA (JP): Financial markets gave a cool response to the
announcement of the new cabinet lineup on Tuesday, with stock
prices losing ground and the rupiah ending the day almost
unchanged in featureless trading.

Securities analysts said that stock prices, which rose in the
morning session, lost strength later in the afternoon following
the announcement of President Abdurrahman Wahid's new cabinet.

The analysts said that the economic team in the cabinet did
not really meet market expectations and investors even questioned
their capability in lifting the country out of the crisis.

"This has raised some concerns of market players," one analyst
said.

Except the newly appointed Chief Economic Minister Kwik Kian
Gie, other members of the economic team such as Minister of
Finance Bambang Sudibyo are hardly known by the public.

The Jakarta Stock Exchange Composite Index closed down 2.8
points, or 0.5 percent by end of the day at 594.253, with 705
million stocks changing hands at Rp 1.1 trillion .

The rupiah increased slightly to Rp 6,785 as compared to Rp
6,920 late on Monday.

Budi Hidmat, an economist at Bahana Securities, said that the
response from the market was negative because many investors
underestimated the capability of the new cabinet's economic team
in coping with the country's crisis.

He suspected that the composition of the cabinet lineup was
made only as a political compromise rather than due to the track
records of the team members.

Abdurrahman won the presidential race last week thanks to
supports from Golkar and several Islamic-based parties.

Analysts initially feared that the President would have to
include representatives of the parties in the new cabinet to
repay his political debts, ignoring their technical capabilities
in managing their ministerial posts.

David Chang, head of the research department of Trimegah
Securities said that the fall in share prices did not genuinely
reflect the formation of the new economic team.

He said that most investors were still adopting a wait-and-see
attitude until the team announced their priorities in dealing
with the country's bank restructuring program and in maintaining
good relations with the International Monetary Fund.

Chang said that the long-term prospects of the rupiah and
share prices remained bullish despite the initial negative
response from the market to the new economic team.

The JSX Composite Index, according to Chang, would further
increase to reach 725 points while the rupiah would strengthen to
Rp 6,500 against the U.S. dollar by the year end.

Foreign exchange dealers said the rupiah underwent little
movement because many institutional investors bought the
greenback to cover short positions.

Foreign investors

Foreign analysts are, however, more positive. They welcomed
Indonesia's new and reform minded cabinet on Tuesday as a clean
break with the country's corrupt past but worried its lack of
experience may show once the election euphoria blows over.

Adburrahman's new government is a cross-section of the
political spectrum, with fewer generals than at any time in the
country's history. Yet even though Abdurrahman is fast proving a
wily politician, Indonesia still faces huge economic, law and
order, and corruption problems and the tasks facing the six-day
old president's new team are daunting.

"The essential problem was that Abdurrahman could have gone
for experienced people, but then they would have been linked to
former President Soeharto. Or he could go for a clean, new and
inexperienced team. He chose the latter," said economist Nick
Bibby at West LB Asian told Reuters

Nevertheless, chief economic minister Kwik, Vice-President
Megawati Soekarnoputri's senior economic advisor and an ethnic
Chinese, is seen as a safe pair of hands, as well as an important
signal to the country's minorities.

Finance Minister Bambang is a largely unknown quantity. But he
is expected to play second fiddle to Kwik and with the country
beholden to the International Monetary Funds for desperately
needed loans, analysts expect largely sound economic policies.

More striking, and potentially more decisive in that political
stability is seen as a precondition for implementing reforms, are
appointments such as leading Golkar party reformist Marzuki
Darusman as attorney general.

"That's very important and a very smart move in terms of
political stability," an analyst at a leading U.S. house said.
(rei/03/hen)