Soeharto's health to hang over financial markets

Soeharto's health to hang over financial markets

SINGAPORE (Reuter): Concerns over the health of Indonesian President Soeharto will hang over regional stock and currency markets next week, a senior analyst said yesterday.

News that Soeharto, 75, will leave for Europe today for a medical checkup shook Indonesian markets on Thursday and Friday despite an official denial that Soeharto was ill.

The Indonesian leader has given no indication of a preferred successor.

"They're worried about his health. They're worried about the fact that no-one knows who's going to succeed him," John Lilley, director of analytical operations for the Asia-Pacific region for MMS International, told Reuters in an interview at a fund managers' conference in Singapore.

"I think there's going to be some reverberations early in the week," Lilley said when asked if Soeharto's health will continue to affect the markets.

The Jakarta stock market composite index tumbled 2.30 percent to 575.05 points on Friday, with selling led by foreign investors. Brokers noted a slight recovery towards the close on bargain-hunting.

"We expect some pressure from U.S. fund managers next week," one local broker said.

"They're worried about what is going to happen to the structure of industry given that several of his (Soeharto's) relatives own the industries. Those are the key concerns about Soeharto," Lilley concluded.

Worries over Soeharto's health also pressured the rupiah, which hit a year low of 2,349 to the U.S. dollar on Thursday on unfounded rumors that Soeharto had suffered a heart attack.

It recovered by the end of the week to Rp 2,343 but dealers said it could be rattled by any rumor until a firm statement was available on the President's health.

But Lilley said the attention of dealers and traders next week may shift away from Indonesia to the strong surge of the U.S. dollar against the Japanese yen.

"The sensitivity of the market to that shows that it's a pretty big deal. When they got out, you saw the rupiah go 'pffft'," Lilley said.

He told delegates Indonesia now has the highest political risk factor of emerging markets in the region, including Thailand, Malaysia, the Philippines and others.

Minister/State Secretary Moerdiono said doctors had given Soeharto -- one of the world's longest-serving rulers -- a regular six-monthly check on June 29 and recommended he undergo more sophisticated tests not available in Indonesia.

Moerdiono denied the President was ill.

He said Soeharto would leave for Europe today without mentioning his destination. Diplomats said it was possibly Frankfurt, Germany.

Soeharto rose power after a mid-1960s abortive coup that was blamed on the country's Communist Party, or PKI.

MMS is a unit of Standard & Poor's (S&P) information service, which is more famous for its credit rating industry evaluating investment risks in countries and companies around the world. S&P is a division of U.S.-based McGraw and Hill.