Sentiments rose, but may reverse: Survey

The Jakarta Post, Jakarta

Business confidence improved in Indonesia in the August- September period, buoyed up by a peaceful change in government in late July, but the September 11 terrorist attacks on the United States could well reverse the trend once again, according to a survey.

The Dana Reksa Institute, in its latest two-monthly survey of 700 corporate leaders in Indonesia, found all but one index to have shown some improvement in the August-September period, compared with the previous two months.

The survey was conducted by PT Grup Riset Potensial.

The report attributed the jump in the Business Sentiment Index (BSI) to the nonviolent change in government from president Abdurrahman Wahid to Megawati Soekarnoputri.

An agreement by the International Monetary Fund to resume its lending program in Indonesia in September bolstered the Present Situation Index, while hopes that Megawati would breathe new life into the ailing economy strengthened the Expectation Index.

The index gauging Business Confidence in the Government (BCGI) also rebounded to 112.7, from the 89.7 registered during the last two months of the Abdurrahman administration. A reading of below 100 means that pessimism outweighs optimism.

Optimism spread fast that the long-awaited recovery would eventually get back on track, with companies poised for a return to profitability in the wake of Megawati's election, the report said.

However, the data on corporate performance did not support the turnaround story, according to the Dana Reksa Institute.

On the corporate front, the corporate performance index slipped to 147.8 from 148.8, as there was little reason to cheer about corporate profit/loss fundamentals.

The earlier bearish sentiment had conspired with weakening fundamentals to eat into corporate earnings, it said.

The survey said that concerns remained, with companies still uneasy about reaction within Indonesia to events in Afghanistan. They were also edgy about a highly unstable rupiah, with doubts over the currency's ability to sustain the ascent shown in the first weeks of August.

The improved business outlook has been marred by lingering concerns over anti-U.S. protests, amid worries that the government was not taking action fast enough to make the country safe and orderly.

As a consequence, the country's grim fundamentals had returned to the forefront of investors' attention.