Sentiments rose, but may reverse: Survey

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.