Local stocks to recoup next year: Economist

JAKARTA (JP): Local stock markets should recover from their current downturn next year, possibly in the third quarter, but only with foreign investors' help, according to economist Sjahrir.

Sjahrir said at a seminar Thursday hosted by Trimegah Securities that foreign institutional investors, especially those managing huge funds, would eventually reenter the market to buy certain selected undervalued stocks.

"As the American market cannot absorb all these funds, there is a big chance for the Asian markets, including Indonesia, to absorb part of the funds ," Sjahrir said.

"Since most stock prices on the Jakarta Stock Exchange (JSX) are already cheap, now is the right time to buy," he said.

Nevertheless, Sjahrir predicted, foreign investors would still be selective in their pickings. Most would probably chose stocks of export-oriented and agrobased companies.

Export-oriented tin miner PT Tambang Timah, gold producer Aneka Tambang, salt producer Fiskar Agung, cocoa producer Davomas Abadi and Daya Guna Samudera would still have good long-term prospects for investors.

"While financial and property stocks were hardest hit by the currency crisis, these companies benefit from the rupiah's depreciation," he said.

Latest data from the JSX shows that 40 percent of stocks which had been traded under their par value and around 60 percent had been traded under their book value as of Nov. 21 this year.

Stock prices on the JSX have declined by almost 50 percent from the market's peak on July 7 this year when the main price gauge, the composite index, hit 740.83 points.

Prices of financial institutions' and property companies' stocks have lost between 20 percent and 50 percent of their market value since then, while the prices of export oriented and agrobased companies have gained ground.

"This shows that stocks in this category will certainly provide long-term capital gains for long-term investors," Sjahrir said.

President director of Trimegah Securities Avi G. Dwipayana predicts that the stock market would recover early next year.

He contended that Indonesia remained one of the most attractive investment spots in Asia for most foreign institutional investors.

"The stock market is a game of psychology. We should always have an optimistic expectation for the market and there is no use feeling pessimistic," he said.

Thursday's market action was highlighted by the listing of state-owned mining company PT Aneka Tambang on both the Jakarta and Surabaya stock exchanges.

Aneka Tambang is the fifth state-owned firm to go public after telecommunications companies PT Telkom and PT Indosat, cement maker PT Semen Gresik, tin miner PT Tambang Timah and PT Bank Negara Indonesia.

Aneka Tambang listed 430.7 million shares, or 35 percent of its total enlarged capital at a price of Rp 1,400 per share. The price of the stock remained unchanged at the JSX's close Thursday.

Brokers said the listing of Aneka Tambang would serve as a best possible test, especially for state-controlled securities firms, following President Soeharto's order late last week that state-owned companies should allocate 1 percent of their profits to buy stocks.

They said the listing of Aneka Tambang gave a slight push to stock trading on the JSX.

The JSX composite index closed 0.8 percent higher, or 3.16 points to 401.70 on Thursday. The bourse was closed yesterday in observance of the Ascension Day of Prophet Muhammad.

Total trading volume was around 577 million shares changing valued at Rp 540 billion (US$150 million) in the regular market. (aly)