Market drops over fear Susilo may lose

Market drops over fear Susilo may lose

Rendi A. Witular, Jakarta

The Jakarta stock market fell on Thursday, with some analysts
saying an key factor was fears "market favorite" Susilo Bambang
Yudhoyono might fail to win the president's job.

The Jakarta Composite Index ended lower by 1.54 percent or
11.92 points, to 759.742, on volume of 1.72 billion shares traded
worth Rp 908.78 billion (US$101 million).

Stock analyst Fendi A. Susiyanto of BNI Securities said the
decline was attributable to profit-taking by investors following
concerns Susilo might lose the runoff on Sept. 20 to incumbent
President Megawati Soekarnoputri or Wiranto.

"Political jitters are one of several key factors that caused
the profit taking. Susilo has been perceived as market-friendly
not only because of his economic programs but also because of his
relatively clean record," Fendi said.

Fendi said the decline came following fears of a possible
coalition between political heavyweights the Golkar Party and the
Indonesian Democratic Party of Struggle (PDI-P) to support
Susilo's competitor in the second round of voting in September.

Golkar and the PDI-P are the two largest factions in the House
of Representatives and their respective candidates, Wiranto and
Megawati, are fighting it out for second place to contest Susilo
in September. As vote counting continues, Susilo's ongoing 6 to 8
percent lead over the other candidates means he is almost assured
of a place in the runoff.

Dealers also said the failure of Susilo to win a majority of
the vote in the first round, which would have ruled out the need
for a runoff, had prolonged the political uncertainty in the
country.

Aside from political concerns, Fendi said the market had
experienced a technical correction as a result of consecutive
gains in the market during the past several days, which caused
several bluechip stocks to become overvalued.

Shares of state telecommunication firm PT Telkom were down Rp
200 to Rp 7,650; cigarette producer PT Gudang Garam declined by
RP 750 to Rp 14,200; its rival PT HM Sampoerna dropped by Rp 100
to Rp 5,550; and automotive kingpin PT Astra International closed
lower by Rp 200 to Rp 5,650.

Other stock analysts blamed the decline in the stock market on
the recent slight increase in Bank Indonesia's benchmark interest
rate to 7.37 percent from 7.34 percent, which prompted several
investors to convert their stock portfolios into Bank Indonesia
SBI promissory notes.

"But in the long-term, the bourse will remain firm," said a
broker with a foreign-based securities firm.

The analysts recommended investors kept shares of mining and
agricultural companies in their long-term portfolios, following
the surge of several mining and agricultural commodities in the
international market, such as nickel, tin, copper, coal, crude
palm oil and rubber.

Analysts said the bourse's fundamentals would remain strong,
with an expected supporting level at 750 and a resistance level
of 786.

On the currency front, the rupiah closed at Rp 9,000 against
the U.S. dollar, up slightly from Rp 9,005 on Wednesday.