Stock exchange braces for possible sell-off

JAKARTA (JP): Selling pressure might hit the Jakarta Stock Exchange (JSX) when it resumes trading on Monday as investors remain nervous following the recent bombing of the building, securities analysts said on Friday.

Jasso Winarto of Sigma Research said that investor anxiousness, which was increasing during the three-day suspension of the bourse, might result in panic selling.

"The market might be hit by selling pressure as foreign investors will remain nervous when the market resumes trading on Monday," Jasso told The Jakarta Post.

JSX management suspended trading on Wednesday, after a car bomb exploded in the building's parking lot and killed 15 people.

Although trading facilities were not damaged by the blast, the JSX postponed trading until Monday, judging the building unsuitable and unsafe to work in.

"Many things have happened in the last three days," Jasso said in reference to the worsening of the country's security situation during the closure of the market.

President Abdurrahman Wahid ordered on Friday the arrest of Tommy Soeharto, the youngest son of the ailing former president, and Muslim activist Habib Alwi al Baaqil for unclear reasons.

The arrest orders could worsen the situation and further hurt market confidence, Jasso said, adding that even good news, such as the International Monetary Fund (IMF)'s decision on Thursday to approve some US$390 million of aid for Indonesia, would not be able to lift market sentiment

The JSX composite index fell to 442.09 on Wednesday closing, the lowest level since President Abdurrahman came to power.

Analyst Raden Pardede of PT Danareksa Sekuritas said that investors were likely to adopt a wait-and-see stance in Monday trading.

"It will take about a week for investors to adjust themselves after three days of suspension," he said.

Raden said that foreign investors, which he reckoned made up between 10 percent and 20 percent of the JSX's trading value, were waiting for domestic investor confidence to return.

International pressure after the killing last week of three United Nations aid workers in Atambua, West Timor, would also continue to weaken the market, he said.

"So the market will be facing pressure from two sides: from Atambua and, more immediately, from the bombing," Raden said.

However, he said, the recently published financial reports of blue chips companies showed that they were fundamentally sound firms.

"So actually the market is now a bit undervalued," he added.

Analyst Adler Manurung of Nikko Securities Indonesia was also gloomy in his outlook.

"Immature investors will likely engage in panic selling," he said.

But investors who before the bombing had sold shares in large value would profit on Monday from buying them back as their prices would fall.

Meanwhile, the owner of the JSX building, PT Procon Indah, reiterated its promise that trading would resume on Monday.

"We're more than 90 percent ready to open the building," Procon director Carrey Alam said.

He said that only minor damage was left to be repaired, including some cabling systems, which he expected to be fixed by Saturday.

Repairs to the drainage system, which took the most damage and were the main reason why Procon decided not to open the building before Monday, had been completed, he said.

Carry added that a construction audit on Thursday concluded that there was no serious structural damage to the building.

PT Bursa Efek Jakarta president Mas Achmad Daniri said the company planned to start implementing remote trading facilities next year which would allow trading if the JSX building was inaccessible.

"We're hoping that in our 2001 budget we can allocate some funds to implement remote trading," Daniri said.

He estimated that developing the system would cost the JSX some Rp 20 billion (US$2.3 million).

However, he said, that traders should also prepare themselves and that it might take some time before remote trading became widely accepted.

"As for now, we're focusing on scripless trading and we expect that by 2001 most companies will have adopted the system," Daniri said. (bkm)