Rating cut sends negative signal on share trading

Rating cut sends negative signal on share trading

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
will likely lose footing this week after a slight recovery in the
previous week.

Securities analysts said Standard and Poor's decision to lower
on Saturday Indonesia's long-term foreign currency rating to
triple-'B'-minus from triple-'B' would send a negative sentiment
to stock trading.

"The cut in the sovereign rating is really bad news to the
market, which last week had started to recover after persistent
drops," an analyst said. He added that the hardest hit would
include blue chips Bank BNI and H.M. Sampoerna, whose long-term
foreign currencies were also lowered as a result of the cut in
the Indonesian sovereign rating.

The government's announcement last week to seek financial aid
from the International Monetary Fund (IMF) had helped restore
public confidence. Both the rupiah and share prices gained ground
after persistent drops as investors believed the IMF financial
package would help mend the country's financial crisis.

They, however, said that Standard and Poor's announcement
would again turn the upward market direction downward at least
until the government received a firm commitment from the IMF
about its aid package.

"The IMF package will clearly become the dominant factor to
determine the market as it has the potential to enliven it," an
analyst with a joint brokerage firm said.

"I think the only thing the market needs now is real action
taken by the IMF to restore Indonesia's economy ... which is
still unknown so far," Adnan Tan, sales director of BZW Niaga
Securities, said.

High-ranking IMF officials are expected to begin discussing
the financial package here on Monday.

However, other analysts said that the impact of the proposed
financial package would be short-term.

"The positive impact of the much talked about IMF aid will be
short-lived because the overall condition of the monetary market
remains tight... Interest rates are still high," vice president
of Mashil Jaya Securities Tjandra Kartika told The Jakarta Post.

Financial performances of most publicly listed companies were
not as promising as expected, he said. Many companies had lowered
earning projections due to the ongoing currency crisis.

"I think most companies will suffer great losses in the third
quarter due to foreign exchange losses and the currency turmoil,"
Tjandra said.

Last week, both rupiah and share prices showed improvement
after persistent drops.

The rupiah, which broke the 3,850 level again the U.S. dollar
in the first week of this month, further strengthened last week
to close at 3,355.65 against an opening of 3,470/90.

Currency dealers expected the currency would further
strengthen to between 2,950 and 3,100 in the opening market this
week.

As the currency market strengthened, the stock market also
bore fruit marked with the increasing JSX composite index.

The JSX composite index rose 3.7 percent or 19.275 points last
week to close at 534.75.

Total daily average turnover rose almost 55 percent to 432.20
million shares in the regular market last week compared to 277.40
million shares in the previous week.

While total daily average value rose 38 percent to Rp 493.33
billion (US$136.7 million) last week against Rp 357.08 billion
recorded in the previous week.

Most big capitalized stocks made substantial gains last week
with state-telecommunications firm PT Telkom rising Rp 250 to Rp
3,700 while satellite operator Indosat by Rp 500 to Rp 9,000,
cigarette-maker HM Sampoerna gained Rp 100 to Rp 5,800, Bank
Internasional Indonesia by Rp 100 to Rp 875, Bank Negara
Indonesia climbed Rp 50 to Rp 850 and Bank Dagang Nasional
Indonesia gained Rp 25 to Rp 625. (aly)