President's call may help ailing stocks
President's call may help ailing stocks
JAKARTA (JP): President Soeharto's instruction to state-owned
companies to boost their portfolio investments will help restore
the ailing stock market, said securities analysts.
"It is really good news for investors. I think it will help
bring back the buying impetus," vice president of Mashill Jaya
Securities Tjandra Kartika told The Jakarta Post Saturday.
He said although it will take several days for the state-owned
companies to comply with the President's instruction, the impact
of the order will be psychologically significant enough to renew
trading activities.
On Friday, Soeharto instructed state-owned companies to
allocate at least 1 percent of their profits to buy shares on the
local stock market to help restore the weak trading activities.
The President has also instructed the monetary authorities to
use the US$5 billion standby loan from Singapore as low-interest
credits to improve the liquidity of big and medium companies.
Tjandra said with a total profit of about Rp 6 trillion
(US$1.7 billion) last year, the country's state-owned companies
would have about Rp 60 billion to buy stocks.
"Such an amount is still small compared to the current market
capitalization of around Rp 150 trillion," he said. "But it will
bring much help."
There are around 178 state-owned companies operating in
Indonesia.
A stock dealer with BZW Niaga Securities firms also estimated
stock prices would gain ground on the back of the President's
call.
She estimated that funds from these state companies would be
used to buy undervalued stocks such as those of Bank Negara
Indonesia, Telkom, Indosat, Tambang Timah.
Indonesia's Jakarta Stock Exchange (JSX) Composite Index has
declined by almost 45 percent from its peak on July 7 to as low
as 391.25 points on Friday. At least 70 shares have declined
below their par value of Rp 500.
The Composite Index broke the psychological barrier of 400-
point level last week on a combination of regional weakness,
currency crisis and lack of confidence in the country's financial
and capital market.
The President's instruction was, therefore, timely to bring
back the buying mood because without such a move, the bearish
trading would continue.
"In general, the Indonesian stock market is far from
recovering ... it is predicted to continue with its downward
trend," Asia Equity's Robert Allison said over the weekend.
"With the current situation, in which the share price index
continues falling, no one will fill a buy order. This will make
investors more scary," Harita Securities president Christina Lim
said.
The analysts said that without a bailout measure, the JSX
Composite Index could further plunge to below the 350 level
because the market fundamentals remained very weak.
The unfavorable conditions in other regional markets and the
lack of foreign presence would make the local trading even worse,
they said.
"There is hardly any foreign institutional investors in the
stock market. They have long shifted their focus from this
region," Mashill's Edi said.
The JSX Composite Index fell 10.9 percent, or 45.593 points
last week to close at 391.258 in generally quiet trading. (aly)