Rate fear drags down local share prices

Rate fear drags down local share prices

JAKARTA (JP): Fears of a further increase in interest rates
dragged down share prices on the Jakarta Stock Exchange (JSX)
Monday.

Brokers said that most investors were now waiting for another
increase in SBI rates as last week's increase had failed to prop
up the battered rupiah.

"There are no substantial trading transactions on the local
bourse ahead of the holiday as people are anticipating another
possible interest rate hike," the managing director of Harita
Securities, Christina Lim, said.

The financial markets were closed yesterday in observance of
Islamic New Year.

Brokers said many investors sold their bluechip stocks, such
as Astra International, Gudang Garam, Indosat and Bank Negara
Indonesia (BNI).

"The sales of such big cap stocks undermined the buying mood,"
one of the brokers said.

The stock price of the country's largest automaker, Astra
International, shed Rp 25 to close at Rp 1,725 on 4.74 millions
shares traded, Indosat fell Rp 175 to Rp 12,400 on 239,000 shares
changing hands, Gudang Garam tumbled Rp 500 to Rp 10,400 on
851,000 shares traded and BNI fell 25 to Rp 500 on 3.75 million
shares traded.

The JSX Composite index closed down 4.84 points to 485.64
points on a total turnover of 405.97 million shares changing
hands on the regular market worth Rp 523.86 billion (US$64.23
million).

Concerns about another breach in the IMF-brokered reform
program and fears that spreading student demonstrations would
cause instability also added to the gloomy market outlook, the
broker said.

The head of equities at Bahana Securities, Bruce Rolph, said
most foreign investors sensed that Indonesia was not showing any
serious intention to fully implement the IMF-arranged reform
package.

He said irregularities in the clove monopoly and the crude
palm oil (CPO) regulations negatively affected foreign investors'
sentiment about the local market prompting them to continue
staying on the sidelines.

"Most investors stayed away from the market because they see
that Indonesia is not serious about the implementation of the
package.

"Implementing the reform is more important than signing it."

Under the IMF-brokered $43 billion bailout package, for
example, Indonesia is obliged to dismantle the clove monopoly
given to the Clove Marketing and Buffer Stock Agency (BPPC) by
June.

But reports said another company, PT Kembang Cengkeh Nasional
(KCN), also controlled by President Soeharto's youngest son
Hutomo "Tommy" Mandala Putra, had been established to take on
BPPC's monopoly of the clove trade, the main ingredient of many
locally produced cigarettes.

"This move shows that the country is not serious about the
IMF," Rolph said.

"Any small sign of backsliding in the IMF reform package will
be bad for the country."

He said such bad news might force the IMF to cancel the $3
billion second tranche of financial aid to Jakarta.

Mirroring the stock prices' decline, the rupiah closed
marginally lower in moderate trading ahead of the holiday.

"The market was quiet with no investors seen in the market
Monday," a dealer with a local private bank said.

He said that spot rupiah closed at 8,150 Monday against the
U.S. dollar compared to its Friday close of 7,950. (aly)