Rumored Cabinet reshuffle feared to hit stock market

Rumored Cabinet reshuffle feared to hit stock market

JAKARTA (JP): Unconfirmed reports of more reshuffling in the
Cabinet will likely continue to cause jitters to investors on the
Jakarta Stock Exchange (JSX) this week, securities analysts said.

The analysts said that the rumors reflected uncertainty in the
Cabinet and this would send wrong signals to both equity and
currency markets.

"If President Abdurrahman Wahid goes ahead with such a plan,
it will certainly send a big blow to the market," one security
analyst said.

Speculation about the planned reshuffle came about after the
President, also known as Gus Dur, suspended former Coordinating
Minister for Political Affairs and Security Gen. Wiranto and
State Secretary Ali Rahman early last week.

The replacement of Gen. Wiranto cheered the market but it did
not last long as investors started to dump their shares the
following day due to the unconfirmed plan to reshuffle.

Jasso Winarto, analyst at Sigma Research, said the market
sentiment was very negative last week and the sentiment would
likely continue to undermine the market. A possible cleansing of
military officers loyal to Gen. Wiranto would worsen the
sentiment, he added.

"Gus Dur's administration in most cases fails to produce
positive sentiments for investors," he said. He estimated the
Jakarta Stock Exchange (JSX) Composite Index would decline
further by between four and five percent this week.

"Investors are all waiting for positive news, but they are
wondering what could the positive news be?" Jasso added. Fear of
interest rate hikes in the United States will also add to the
weak sentiment, according to him.

The U.S. Federal Reserve recently raised its interest rate in
early February by a quarter percent and is expected to raise
another quarter percent in March.

The interest rate hike could dampen the stock exchanges there
and in turn could have domino effects on other markets worldwide.

"There were many negative sentiments last week, and they will
still be there," said another analyst at local securities
company.

Concerns that Indonesia's weighting in the Morgan Stanley
Composite Index (MSCI) might be reduced could also contribute to
the poor outlook next week, another analyst said.

International investors use the index to determine the
relative portion of investment portfolio allocation among
countries in which they invest.

Foreign investors were seen selling their blue chip shares
last week to leave the local stock exchange for other markets in
the region.

The JSX Composite Index dove six percent last week to close at
599.57 points, down from 635.07 the previous week. The daily
average transaction value decreased to Rp 933 billion last week,
compared to Rp 1.04 trillion the previous week.

The daily average turnover also decreased to 741 million
shares last week from 1.14 billion shares the previous week.

Last week's top gainers were PT Mitra Rajasa, whose shares
increased 45.45 percent, PT Soedarpo Corporation (35 percent) and
PT Tirta Mahakam Plywood Industry, which rose 30.91 percent.

The week's big losers were PT Bakrie Finance Corporation,
whose shares fell by 50 percent, PT Argha Karya Prima Industry
(29.03 percent) and PT Bank Niaga, which experienced a 28.57
percent fall.

The top brokerage firms by transaction value were PT Credit
Lyonnais Indonesia with Rp 681.52 billion in transactions, PT
Danareksa Sekuritas (Rp 369.44 billion) and PT HSBC Securities
with Rp 342.40 billion in transactions.

Rupiah

Jasso estimated the rupiah, which showed a sign of strength
following the announcement of Wiranto's replacement, would also
be affected by the negative sentiment in the equity market.

"Some investors have a negative feeling about the rupiah right
now and has prompted them to buy dollars to reduce risk," he
added.

Foreign exchange dealers said some local corporations also
showed up in the currency market and bought dollars last week to
finance their debts and imports, said a dealer.

Amid the weakening rupiah the government expressed its
prediction late last week that the currency should appreciate to
between 6,000 and 7,000 to the greenback.

The rupiah depreciated by 1.6 percent to close the week at
7,405 to the U.S. dollar.

Meanwhile, the treasury bonds launched on the Surabaya Stock
Exchange (SSX) early this month booked transactions worth Rp 5
billion, priced at 96 percent of the bond face value.

These were the first transactions made on the treasury bonds.

The SSX traded Rp 2.16 trillion of the total Rp 255 trillion
treasury bonds issued by the government last year to finance the
costs of recapitalizing the country's ailing banks.

The bonds received a cool response from investors. (udi)