Political protests seen putting pressure on market

JAKARTA (JP): Reports on escalating antigovernment protests will likely put more pressure on the country's already ailing financial market this week.

Securities analysts have said that at this stage, a fresh disbursement from the International Monetary Fund (IMF) would do little to help the economy.

The head of research at Mashill Jaya Securities, Tjandra Kartika, said that continued antigovernment protests would negate the country's painstaking efforts to heal its tattered economy.

"How can we expect foreign investors to have confidence in our recovery if political protests like this continue to take place?" he asked.

Some 1,000 East Timor students rallied Saturday against the government in the provincial capital of Dili and called for a referendum on self-determination, following similar protests in Jakarta the previous day.

Several groups of students also staged protests last week demanding the government eliminate corruption, collusion and nepotism.

Concern over the country's unresolved political uncertainties are casting a shadow on trading activities despite encouraging signals from the IMF that it will release a new disbursement from its bailout package.

An economist with Danareksa Sekuritas, Raden Pardede, said the anticipation of a new IMF disbursement would, in a normal situation, have improved market sentiment.

"Now, such an expectation is very much overshadowed by the country's unresolved political uncertainties," he said.

The IMF director for Asia and the Pacific said here last week that the IMF would speed up the disbursement to help the country's ailing economy.

Tjandra said investors were also disappointed over the worsening performance of the country's major companies.

Most local companies are already too weak to even pay the interest on their overseas debts because the amount of their foreign debts have more than tripled in rupiah terms.

The rupiah has plunged more than 80 percent against the U.S. dollar since July last year.

Tjandra said the capital market's short- and long-term prospects largely depended on the direction of the rupiah, which is predicted to further weaken in the coming days.

"I think there is no sign that the rupiah will strengthen against the dollar during this political uncertainty," Tjandra said.

The rupiah closed at 14,000 to the U.S. dollar Friday, down from its close at 11,550 the previous week.

Trading activity in the local bourse is predicted to remain dormant with most foreign brokerage firms likely to continue discarding their stocks linked to Soeharto's family and his cronies.

"Investors fear that stocks of companies linked to Soeharto's family and his cronies will be worthless," a broker with Bali Securities said.

The JSX Composite Index fell slightly to 408.37 points last week from 409.51 the previous week

The average daily turnover also slid 23 percent to 231.75 million shares on the regular market from 304.59 million shares the previous week.

The average daily transaction also fell 28 percent to Rp 238.83 billion (US$17.05 million) last week from Rp 332.87 billion the previous week. (aly)