Share prices plunge on local market
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX) plunged yesterday, with the JSX composite index losing 2.5 percent to close at 478.91 points in moderate trading.
Securities analysts attributed the drop in share prices to investors' worries over the wane of the government's credibility in adopting its strict economic policy.
"Investors are nervous with the situation and they are waiting for the outcome of the legal dispute between parties involved," an analyst with a joint venture securities firm said.
The second son of President Soeharto, Bambang Trihatmodjo, filed a lawsuit against the government Wednesday over the government's move to close his bank, Andromeda Bank, one of 16 banks closed as part of a reform package to support the International Monetary Fund's (IMF) program to bail out the country's ailing economy.
Soeharto's half brother Probosutedjo, chairman of Bank Jakarta -- which was also closed last week -- was also considering legal action to reverse the liquidation of his bank.
"The legal actions by these politically well-connected businessmen have made investors very nervous," an analyst said.
Stock brokers and analysts said the market expected the government to immediately respond to the dispute in order to avoid a prolonged market decline in the near future.
"Investors are preferring to track sidelines until the dispute is resolved," a broker said.
Managing director of sales at Lippo Securities Harry Danardojo said the closure of 16 banks worsened public confidence in listed banks.
"Medium-sized banks bore the brunt of the closures," he said, referring to the public's unwillingness to deposit at mid-sized banks.
The liquidation of the banks caused a rush on several small banks as depositors withdrew their money and placed it in state- owned banks.
Like other analysts, Harry said such a phenomenon did not indicate a decline in economic fundamentals but more of a lack of confidence.
The analysts said confidence would remain weak in the coming weeks and would continue to depress stock-trading activities.
"It's difficult to renew market sentiment at a time when macroeconomic conditions are still unattractive to foreign investors," one analyst said. "The presence of foreign investors will be key to the reemergence of the market," he added.
The rupiah strengthened against the dollar in late trading on Thursday following joint intervention by the central banks of Singapore, Indonesia and Japan, dealers said.
The rupiah rose to a high of 3,250 in Singapore and 3,270 in Jakarta from 3,340, before settling at 3,280/3,300, compared to an opening of 3,320/40 in the morning trading session, currency dealers said.
Singapore's central bank said it had intervened in foreign exchange markets Thursday to buy the rupiah in concert with the Indonesian and Japanese central banks.
"It was a sudden move ... I suppose liquidity was thin and when the central banks hit the market, the next move was very fast," said Ishak Ismail, a market analyst, as quoted by Reuters as saying yesterday. (aly)