Stock market remains gloomy despite hopes

JAKARTA (JP): Trading on the Jakarta Stock Exchange (JSX) is expected to remain sluggish this week, despite hopes that Indonesia will soon receive the next tranche of aid from the International Monetary Fund (IMF) rescue package, stock analysts said.

Head of research at Pentasena Securities Mohammad Syharial said that disbursement of the loan, which will also trigger the release of funds pledged by other bilateral and multilateral donors, should give the country's beleaguered financial markets a boost.

"The loan will be a pivotal time for foreign fund managers to decide on their investment strategy in the country," he said.

IMF Asia Pacific director Hubert Neiss told a media conference on Saturday at the end of his four-day fact-finding mission that the IMF board would soon consider whether to resume loan disbursements to Indonesia.

"It is not up to me to decide. But with the economy deteriorating rapidly they will move as quickly as possible," he said. "Every week delayed will make it even more difficult."

Neiss is due to report to the fund's board in Washington this week and his recommendation could be crucial in determining when and how the IMF will resume payments.

The IMF, which pledged last year to provide US$10 billion of the US$43 billion bailout package for Indonesia's ailing economy, has so far released $4 billion in funds.

Indonesia was initially expected to receive another $1 billion from the IMF on June 4, but transfer of the money was delayed because of the political situation.

Adriansyah Chaniago, a senior analyst with state-owned Bahana Securities, said release of the next tranche of the loan would certainly enable foreign fund managers, who have been avoiding the country for political and economic reasons, to update their portfolio investment strategy in the country's dire market.

"Though our economy remains bleak in the long term, the IMF loan will make foreign fund managers review their portfolio strategy here," he said.

"We cannot expect the flow of foreign funds to immediately increase, but their commitment to stay in the country's market will be positive,' he said.

Pentasena's Syharial and Bahana's Adriansyah both, however, agreed that trading activities on the local bourse would remain minimal in the short-term while foreign investors watched for further developments in the country's political situation.

Several stock brokers said that in the absence of foreign investors in the local market, local investors would continue to trade speculatively on selected stocks, especially those linked to Soeharto's family such as Bimantara Citra and toll-road operator Citra Marga Nusapahala Persada.

"These stocks have been under severe selling pressure over the past few weeks and it is now time to buy," Suhendra, a broker with Trimegah Securindolestari said.

But he said that local and foreign investors would continue to dump stocks linked to the former president and his cronies because of the cacophony of calls demanding a thorough investigation of the first family and their cronies' wealth.

One such company is Salim Group, which owns noodle maker Indofood Sukses Makmur and cement maker Indocement Tunggal Perkasa.

"Investors now fear holding the stocks of these companies," the broker said.

Head of research at Socgen Crosby Securities Goei Siauw Hong said an association with former president Soeharto's children and his long-time allies, which was a great asset when Soeharto was still in power, had now become a liability.

Head of research at Sigma Batara Securities Fadjar Limin Sutandi said the government should properly tackle economic and political problems like mounting private sector debt, food shortages, and the question of general elections.

"The market is now asking how and when the government will settle these problems," he said, pointing out that a resolution to these problems would restore foreign investor confidence in the country.

He predicted that the main price index would nosedive to as low as 310 in the short-term.

The JSX Composite price index fell 5.54 percent, or 24.68 points, to 420.46 last week, down from 445.14 the previous week.

The average daily turnover was 243.49 million shares on the regular market, compared to 110.92 million shares the previous week.

The average daily transaction value increased to Rp 263.43 billion (US$23.94 million) last week, up from Rp 107.10 billion the previous week. (aly)