Stock market to recover from recent slump
Dadan Wijaksana, The Jakarta Post, Jakarta
The Jakarta stock market is expected to recover from its recent slump as investors will not abandon as yet a market where most of its stocks are undervalued in a country whose economic fundamentals are not as bad as many might have said.
An investment analyst at a foreign-based bank also said that the country might benefit from the WorldCom fiasco, which reportedly had caused plenty of U.S.-based fund managers to shift their investments to Asia.
Although it was also WorldCom that has contributed to a sharp decline in the Jakarta Composite Index, he said, Indonesia should take advantage of the scandal as plenty of investment heavyweights were now entering the Asian market.
"... Coupled with the fact that the current prices of some of leading corporates are considered as very cheap, I think (the) Index will start to rebound in the near future," he told The Jakarta Post over the weekend.
"I haven't seen such funds entering the Jakarta market, but we should not rule out such prospects as our market has been long regarded as speculative and having a high level of volatility, making it attractive for punters."
PT Danareksa Securities analyst Ferry Latuhihin also said the index would climb back soon, amid what he referred to as "the not-so-bad" macro and microeconomics conditions.
After experiencing a strong performance in the past several months, the index has been put under heavy pressure in recent weeks due to external and internal factors.
The index closed lower Friday at 492 points, more than a 50 point drop from its level in mid-June.
"It was external factors such as the WorldCom scandal and also internal ones, at corporate level, that are to blame for the index's sharp fall, not the fundamentals," Ferry wrote in an article published in Bisnis Indonesia recently.
"But this sentiment would soon go away, and the index would get back on its previous upward track," he added.
Both analysts shared the same opinion that setbacks in various macroeconomics indicators, such as a drop in foreign direct investment (FDI) and in exports, were mainly due to a slower pace of the global economic recovery, therefore they cannot be held responsible for the index's fall.
The WorldCom scandal erupted last month when the accounting firm giant admitted that it had improperly booked US$3.8 billion of expenses.
The scandal spread out bad signals worldwide amid uncertainty over the pace of global economic recovery, especially in the U.S. and Japan, sending bourses in many countries stumbling.
The Jakarta stock market was no exception, starting to lose some of the 36 percent in gains it had recorded since the beginning of the year.
This has been exacerbated by some questionable corporate actions.
State-owned telecommunication firm PT Telkom's decision to cancel the planned issuance of $100 million worth of bonds and set aside 50 percent of its profit for dividend payment created worries among market players over the company's liquidity condition.
And the recent blast near the Army's Special Force building raised concerns of political and security disturbance ahead of the People's Consultative Assembly annual session in August.