Selling pressure likely on local stock market

Selling pressure likely on local stock market

JAKARTA (JP): Trading on the Jakarta Stock Exchange (JSX) is
likely to be under heavy selling pressure this week due to
increasing economic and political uncertainties, securities
analysts and brokers believe.

They said over the weekend that most foreign investors, who
stayed on the sidelines last week, would continue to stay away
from the markets on the grounds that the country's market was
mired in economic and political uncertainties.

"Most foreign investors see that Indonesia is not consistent
with its commitment to implement the IMF reform program," head of
equities at Bahana Securities Bruce Rolph told The Jakarta Post
over the weekend.

He said that investors had been jolted by controversial
comments by cabinet ministers not to lift the export ban on crude
palm oil and its derivatives on April 22 as stipulated in the
newly revised reform program agreed with the International
Monetary Fund (IMF).

Minister of Trade and Industry Mohammad 'Bob" Hasan made a
controversial remark early last week that he would not lift the
ban until domestic prices stabilized.

"Foreign investors question whether Indonesia has serious
discipline to commit to reform programs agreed with the IMF," he
said.

IMF chief representative in Jakarta Kadhim Al-Eyd is
convinced, however, that the ban would be scrapped by the
deadline.

And Minister of Finance Fuad Bawazier said in Washington
Friday that the government would carry out fully the economic
reform program.

"But controversial remarks like that could cause foreign
investors to pull back from the country's market," Rolph said.

The government faces an acid test this week of its commitment
to the economic reforms agreed with the IMF.

Under the new deal Indonesia has committed to implement the
following measures by April 22:

- Enact government regulation in lieu of law to amend the
bankruptcy law and establish a special commercial court.

- Establish monitoring system for structural reforms.

- Reduce export taxes on logs, swan timber, rattan and
minerals to a maximum of 30 percent and phase in resource rent
taxes on logs sawn timber and minerals.

- Transfer claims resulting from past liquidity support to the
bank restructuring agency from the central bank.

Securities analysts said the market would be overshadowed by
market speculation that Bank Indonesia would likely raise short-
term promissory notes (SBI) this week.

Fuad indicated Friday that the government would probably raise
interest rates sometime this week to shore up the rupiah.

Last week, amid market expectation about rising rates, Bank
Indonesia decided to maintain the benchmark rates at the current
level.

Analysts said heightening political tensions, sparked by
intensifying demonstrations by students demanding quick economic
and political reforms, would also put more bearish pressure on
trading activities in the local market.

"Investors are concerned that student demonstrations will
spread out to the streets," Rolph said, pointing out that street
demonstrations could translate into massive clashes between
students and security personnel.

Rolph said that a possible anti-Indonesia resolution by the UN
Human Rights Commission being issued in Geneva this week would
also cast a shadow on trading activities as foreign investors
would definitely shun the market.

"Our country is under the spotlight of the international
community now, the slightest breach will attract the attention of
the international community," an analyst with a local securities
said.

The JSX composite index fell 3.7 percent or 19.86 points to
507.902 last week.

Daily average turnover last week dropped 12 percent to 428.04
million shares changing hands on the regular market compared to
491.39 million shares the previous week.

Daily average transaction value declined 6 percent to Rp
522.67 billion (US$63.74 million) last week compared to Rp 551.46
billion the previous week.

Most large-cap stocks ended lower with state-owned domestic
telephone operator PT Telkom falling Rp 300 to Rp 3,600,
satellite operator PT Indosat Rp 525 to Rp 12,300, cigarette
maker Gudang Garam Rp 300 to Rp 11,200, Bank Internasional
Indonesia Rp 125 to Rp 675 and Bank Negara Indonesia Rp 50 to Rp
550. (aly)