Stock, currency markets unfazed by impending war in Aceh

Stock, currency markets unfazed by impending war in Aceh

A'an Suryana, The Jakarta Post, Jakarta

The looming war in Aceh has not affected Indonesia's stock and
currency markets as players see the planned war as a local
security problem that does not pose any national threat.

Stock and currency markets remained steadfast on Tuesday,
despite escalating tension in the region after the government's
deadline for the separatist Free Aceh Movement (GAM) to disarm
passed on Monday.

The stock market barely moved, ending the day on 473.51
points, up from 473.93 the previous day, while the rupiah
remained steady at Rp 8,440 against the U.S. dollar on Tuesday
from Rp 8,430 on Monday.

Stock analyst Jasso Winarto said the steady stock index was
largely due to the recent success of Bank Danamon's share
divestment, a decision by rating agency Standard & Poor's to
upgrade the country's credit rating by one notch and gains made
on Wall Street.

Regarding the imminent war in Aceh, Jasso said it was weighing
slightly on market sentiment as its impact on the economy was
expected to be minimal.

Economist Iman Sugema from the Institute for Development of
Economics and Finance (Indef) agreed, saying any war in Aceh
would not affect Indonesia's economy as a whole.

"The tension in Aceh is local in nature," he said.

Jasso said that the market had anticipated the war, and market
players mostly believed that the Indonesian Military (TNI) would
manage to crush the rebels.

This confidence was largely attributed to the strength of the
Indonesian Military (TNI), which was sending 50,000 well-equipped
personnel. GAM, by contrast, had just 5,000 poorly equipped
fighters.

Most of all, the deployment of soldiers had not sparked
objections from domestic or international groups.

On Tuesday, investors remained eager to find blue chip shares,
as represented by the hike of the index's trading volume and
values, compared to the previous day.

The trading volume rose slightly to 520 million shares on
Tuesday from 449 million shares traded the previous day, while
the trading value also increased to Rp 535.19 billion from Rp
413.48 billion.

All in all, the stock index has been steady at 460 points to
480 points since last week.

In the currency market, the rupiah was also performing well
despite the tension. The rupiah remained trading below the Rp
8,500 level.

Overall, the rupiah has performed well at level Rp 8,400 to Rp
8,600 since last week. Monday's close at Rp 8,430 was a 32-month
high.

Currency analyst Farial Anwar said that market players were
already immune and getting used to security problems in the
country.

Only when GAM enlarged its war zones into Jakarta, for
example, by launching terror attacks, would investors retreat
from the local market.

Or, if attacks do occur, it could also invite speculators to
play the market to gain short-term profits, Farial said.

"If the bombing happens in Jakarta, it may attract speculators
to take short-term profits right after the bombing, but after
that business will run as usual," he said.