New deal on debt talks revive market sentiment

JAKARTA (JP): A fresh deal on restructuring the country's US$80 billion private-sector debt brought fresh hope to Indonesia's battered financial market yesterday.

Securities dealers said that share prices, which had been under strong selling pressure over the past several days, had a rare increase, pushing up the main price index to close 3.5 percent higher.

The rupiah, which opened at 11,600 per U.S. dollar, rose to close at 11,500, a slight increase from the previous day's 11,700.

A dealer with a joint venture bank said, however, that positive news on the private sectors' debt rollover plan had not significantly improved market sentiment in the currency market as some market operators remained edgy over the country's deteriorating political and economic situation.

"The fresh deal on private debt should have seen the rupiah strengthen, but economic and political uncertainties barred it," he said.

Dealers said the rollover plan on Indonesia's overwhelming corporate debt was crucial to pulling the country out of its economic doldrums and restoring investor confidence in Indonesia's hammered economy.

"The debt talk deal, along with the release of the IMF loan, should bring the rupiah to the 9,000 level against the dollar," a dealer with a local private bank said.

Indonesia and creditor banks agreed yesterday to extend repayment of private-sector corporate debt by up to eight years with a grace period of three years.

Germany's Deutsche Bank said the main points of a framework debt deal had been agreed upon. Corporate and bank foreign liabilities would be regulated and trade finance would be maintained, throwing a lifeline to Indonesia's struggling exporters.

Taking the mild lead of the rupiah, stock prices on the JSX followed suit with the benchmark price index rising 3.5 percent or 13.72 points to 406.32 points on a total turnover of 436.28 million shares worth Rp 481.03 billion ($43.73 million).

Stock analysts attributed the increase in the main price index to positive market response to a fresh agreement on private debt talks in Frankfurt.

"It is positive and it should improve investors' sentiment in the country's battered market," said the head of research of Vickers Ballas Tamara Securities, Noraya Soewarno.

She said the decline in the rupiah's value by almost 80 percent since July last year had caused the value of the country's overseas private-sector debt to skyrocket and had forced the country to the brink of collapse.

"But talks on debt restructuring really is like getting fresh blood," she said.

Stock brokers said trading activities on the local bourse, which has declined over the past eight days, were buoyant as some investors bought back debt-ridden blue-chips stocks in anticipation of the debt talk deal.

"Trading activities on the market were exuberant," a broker with Mashill Jaya Securities said.

He said most local investors were euphoric over the debt talk deal in Frankfurt. They responded by placing large buying orders on stocks which had been under selling pressure over the past few weeks. They bought shares in automaker Astra International, Indofood Sukses Makmur, Bimantara Citra, Citra Marga Nusaphala Persada, Tjiwi Kimia, HM Sampoerna, Gudang Garam.

The stock prices of Astra International rose Rp 300 to Rp 900 on a total turnover of 64.09 million shares. Noodle-maker Indofood Sukses Makmur rose Rp 500 to Rp 1,575 on 73.74 million shares, Bimantara Citra rose Rp 25 to Rp 375 on 5.56 shares and Citra Marga Nusaphala Persada climbed Rp 25 to Rp 375 on 3.89 million shares.

But an analyst with a local securities firm said the increase in the main price index did not necessarily reflect the return of foreign investors' confidence in the country's pummeled market.

"It is just a market euphoric response because the country still has to address other economic and political problems," he said, pointing out that the country's political risk remained high for foreign fund managers.

"Since the political risk is still high, foreign fund managers are reluctant to place their funds here," he said. (aly)