Share trading to dwindle as election campaign starts

JAKARTA (JP): Stock trading on the Jakarta Stock Exchange is likely to slow down this week as the country's three political parties begin their election campaigns, said securities analysts.

The analysts said that the trading outlook was cautious, with most foreign investors taking a wait-and-see position.

"I recommend my clients to sell, or at least take a wait-and- see position until the direction is clearer," one foreign analyst said.

Golkar, the Moslem-based United Development Party and the Indonesian Democratic Party, competing for 425 seats in the House of Representatives in the May 29 election, started their campaigns Sunday.

"Campaigning could spark riots like those taking place in Central Java," the analyst said of the rioting which hit several towns in Central Java early this month. "If it happens again, it will certainly hurt the stock trading," he said.

The analysts, however, said that local investors would not be as fearful as foreigners because they knew the situation better.

"Local investors would continue their speculative buying on certain selected stocks," one analyst said.

According to the Jakarta military command, there will be more than 25,000 police and army personnel mobilized to guarantee security ahead of the May 29 election.

The election campaign kicked off on Sunday April 27 and will end on May 23.

The gloomy prospects of the regional stock markets would further worsen the trading outlook at home, the analysts said.

Foreign investors were bailing out on an uncertain U.S. interest rate outlook amid better-than-expected performance in Latin American and European markets, they said.

Senior analyst for ING Baring Securities, Laksono Widodo, said that the trading activities would not as active as the previous week.

DBS Securities shared the same view, saying that the market would be cautious and foreign investors would continue to go sideline.

"Local investors seemed to have recovered from the slide of share prices over the past month, resulting in a flurry of margin calls in the industry, avidly speculating on cheap-priced stocks," DBS said.

Laksono said if the election campaign proves to have little impact on the market, the foreign investors might flock in, and on the contrary, if the election campaign has a negative impact on the market, the foreign investors might go sideline.

"The foreign investors are cautious and they do not want to buy or sell," he said.

This year's election, the sixth during the New Order government under President Soeharto, has been preluded by clashes among supporters of the rival parties in Central Java.

Ethnic and religious-motivated riots in Java and Kalimantan, as well as a politically motivated riot in Jakarta on July 27, 1996, have been widely believed to depict a growing public discontent of the government.

Such unrest is feared to reoccur, especially during the campaigning, though the government has tightened electioneering rules.

The JSX composite index rose 8.56 points last week to 650.82 against the previous index of 637.59.

Total average daily turnover also increased to 217.1 million last week against 180.1 million shares in the previous week.

Total average daily value, however, decreased to US$165.6 million (Rp 397.44 billion) from $189.2 million in the previous week.

Last week, cigarette-maker HM Sampoerna, dipped by Rp 250 to Rp 9,425 and its competitor Gudang Garam by Rp 775 to Rp 10,000.

State telecommunications PT Telkom remained unchanged at Rp 3,600 while Indosat was up Rp 25 to Rp 6,700.

Bank Negara Indonesia and Bank International Indonesia remained unchanged at Rp 1,375 and Rp 1,750 respectively.

Most analyst said that if the election campaign goes well, without any clashes, the coming weeks would see more purchase by investors as the price of the stocks have been cheap.

"Actually, it is now time to buy because the stocks have been undervalued," one analyst said, adding that the time to sell would be after the country's May general election. (09/hen)