Local stocks may surge on new deal with IMF

JAKARTA (JP): Trading on the Jakarta Stock Exchange (JSX) is expected to improve next week following the signing of the government's letter of intent with the International Monetary Fund (IMF).

Analysts said the new letter of intent, which outlines the government's priorities in managing the country's economy, gives investors more courage to enter the equity market.

One analyst said: "The economic-reform targets as stated in the letter of intent reconfirm investors' belief about the positive prospect of the local stock market."

He said that the deal, which would also allow the government to get fresh funds from the IMF, would give new blood to the economy.

The government signed a new deal with the IMF on Thursday, clearing the way for the fund to resume financial support to the country after it was once delayed in September last year over a banking scandal.

The IMF's executive board is scheduled to meet on Feb. 4 to approve a total of US$5 billion in loans to Indonesia to finance its reform program over the next three years.

The stock analysts also said the recurrence of religious conflicts in some parts of Indonesia could exert a negative sentiment to the market, but would only be a minor factor.

Rudy Triyunanto from Bumi Daya Sekuritas said, "We expect the religion-related civil tension in Ambon and Lombok not turn into something that can significantly affect the market."

The market hoped such religious tension would be temporary as the riots appeared to be merely incited by provocateurs who wanted to create instability, said Rudy.

A gathering last week of about 5,000 people on Lombok island, West Nusa Tenggara, who were protesting the killings of Muslims in the province of Maluku suddenly turned violent, setting fire to several churches in the town.

The violence finally settled down, but fear of renewed tension remains.

Meanwhile, hundreds of Muslims in the Maluku province staged a street protest last week after the body of a Muslim man was found dumped in a street of a Christian neighborhood in the province capital of Ambon.

Another analyst said the religious riots in Ambon -- which some feared could have a contagious effect on other parts of the country -- have caused more concerns to foreign investors then to local players in the market.

"Foreigners were more sensitive with the unrest issues as they were seen selling some of their blue chip holdings late last week," he said.

Rudy said next week's trading and the following few weeks' were an important basis for the market's momentum toward reaching a widely expected 1,000 level Composite index in the second semester of the year.

"In general, the market will keep moving on its recovery trend next week, receiving only a minor effects from the riots issue," he said over the weekend.

Currency dealers said the rupiah would not fluctuate too much this week, assuming the violent riots do not develop into anything worse.

They added that the market's reaction toward the draft State Budget presented by President Abdurrahman Wahid last week was positive, with some caution over the realization of the budget.

The JSX composite index decreased by 3.8 percent to close at 664.69 points last week, from 690.89 the previous week.

Its daily transaction value decreased to Rp 1.12 trillion last week, compared to Rp 1.97 trillion the previous week.

The average daily turnover was also down to 1.33 billion shares last week from 2.25 billion shares the previous week.

Last week's top gainers were PT Transindo Multi Prima, whose shares leaped 457.81 percent, PT Mandiri Intifinance, 103.85 percent, and PT Clipan Finance Indonesia. 94.74 percent.

The week's big losers were PT Inti Indorayon Utama, whose shares fell 52.63 percent, PT Bintang Mitra Semestaraya, 37.88 percent, and PT Tri Polyta Indonesia, 34.33 percent.

The top brokerage firms by transaction value were PT Danareksa Sekuritas with Rp 534 billion in transactions, PT Trimegah Securindolestari, Rp 448.79 billion, and PT Ciptadana Sekuritas, Rp 420.14 billion.

The rupiah depreciated slightly to close the week at 7,280 against the U.S. dollar, compared to its 7,210 close the previous week. (udi)