Local stock marts see bullish prospect

Local stock marts see bullish prospect

JAKARTA (JP): Crosby Securities of Hong Kong is very upbeat
about the prospects for Indonesia's capital market over the next
five years despite the current dip stemming from the Mexican
financial crisis.

The company's president, Timothy Beardson, told journalists
yesterday that, assuming that Indonesia's economy will grow by
between 6.5 percent and seven percent per annum, capitalization
on Indonesia's stock exchanges is expected to expand by 50
percent to over US$75 billion within the next five years.

Crosby forecast that growth of the earnings per share among
Indonesian listed companies would be about 20 to 25 percent per
annum, while the annual profit growth from bonds would be about
15 to 16 percent.

"Inflation will slowly come down in the future, showing less
depreciation (of rupiah against the U.S. dollar)... In that
scenario, it will be very positive for investors in bond markets,
including foreign investors," Beardson said.

The Indonesian government devalued the rupiah against the U.S.
dollar in 1986. Since then the government has not devalued the
currency again. Instead, it gradually depreciates the rupiah
value against the dollar. This year, the governments has set a
target of four percent depreciation per annum.

Despite current dramatic slumps in stock values on most
emerging markets, Crosby predicts that the Jakarta Stock Exchange
index will triple to 1,200 by year 2000.

The Jakarta Stock Exchange Composite Index yesterday rose 5.42
points to 447.29 after taking a steep plunge last week to 12-
month low of 441.87. Last week's bearish mood was resulted from
worldwide anxiety over Mexico's crisis, which was triggered by
its recent move of devaluing the peso by 15 percent against the
dollar. The peso has now lost nearly 70 percent of its pre-
devaluation value against the greenback.

"It's normal to be up and down in the short term. But in the
long run, the trend here is upward," said Beardson, in Jakarta to
attend the fifth anniversary of PT Crosby Indonesia, an affiliate
of Crosby Securities.

Temporary

Beardson said the downward movement of the stock index would
be temporary. As soon as fund managers rediscover Asian emerging
markets, including Indonesia, the condition would return to
normal, he said.

He explained that most American, Japanese and British
investors see the emerging markets as a whole, without
differentiating between individual countries; even though they
have very different characteristics, especially in work ethics,
savings rates, investment rates, currency rates and current
account deficits.

Raymond Foo of Crosby Indonesia noted that the economic
fundamentals in Indonesia and Mexico are very different.
Indonesia's economic growth of over six percent per annum relies
on its large savings and investments, while Mexico's growth of
less than four percent counts on high domestic consumption
demand.

Foo said the Indonesian government's target in private
investment, which are expected to account for 80 percent of the
country's projected total new investment of Rp 660 trillion
(US$300 billion) in the next five years, would drive local stock
markets to become bullish in the coming years.

"We expect a higher ratio of market capitalization to gross
domestic product, as some $20 billion will be generated from bond
and capital markets annually," Foo said. (rid)