Stock prices expected to strengthen this week
JAKARTA (JP): The encouraging signs emerging from the International Monetary Fund's review of Indonesia's reform program are expected to bring a new optimism to the country's stock trading activities this week.
Securities analysts said Saturday the renewed optimism would improve confidence in the Indonesian economy, which would in turn have a positive impact on the capital market.
Both foreign and local investors, especially long-term ones, would reenter the market after a long absence to benefit from the positive momentum, they said.
The head of Equities at Bahana Securities, Bruce Rolph, said the positive signs in the IMF's review would mean that Indonesia would probably receive the second $3 billion tranche of the IMF- brokered US$43 billion rescue fund next month.
"The disbursement of the fresh funds will surely improve market confidence in the Indonesian ailing economy," he told The Jakarta Post.
He said that such financial aid was urgently needed by the country to overcome the country's worst ever crisis.
Other analysts agreed that the encouraging signs in the government-IMF talks would be the main factor in the investors' renewed optimism.
The IMF's director for the Asia-Pacific region, Hubert Neiss, said Saturday that the Indonesian government and the IMF had made considerable progress as the international community prepared a relief program for the crisis-hit country.
"We have made considerable progress in the last few days," he told reporters after meeting Indonesia's top economic ministers.
The IMF shelved the disbursement of the $3 billion tranche slated for March 15 this month as the Indonesian government had failed to fully implement the economic reforms tied to the US$43 billion bailout package.
Indonesia's plan to peg the rupiah to a fixed rate against the U.S. dollar under a currency board system (CBS) also created friction between the Indonesia government and IMF and other international creditors.
The donors warned that the plan would not work in the absence of adequate foreign exchange reserves to defend the pegged currency.
Minister of Finance Fuad Bawazier's statement Friday that the government had dropped the CBS plan should also have a positive impact on stocks.
"With such a decision, investors will have a clearer map on the Indonesian economy," one analyst said.
The rupiah has lost around 70 percent of its value against the U.S. dollar since July when the Asian crisis first hit the country.
The rupiah closed at 9,200 last week, up from the previous week's close of 10,400.
Mashill Jaya Securities' research director, Tjandra Kartika, said that despite some progress in the government-IMF talks, the long-term prospects for the country's economy remained gloomy.
The monetary crisis, which has savaged all sectors of the country's economy, will take years to overcome, he said.
"The disbursement of the IMF's fund is only for short-term purposes. Nobody knows what will happen to the country's economy in the long term," he said.
The Jakarta Stock Exchange composite index rose almost 2 percent or 9.99 points to 516.73 last week from 506.73 the previous week.
Total average daily volume rose 42 percent to 594.21 million shares changing hand last week from 415.83 million shares the previous week.
Total average daily value declined 8 percent to Rp 512.40 billion ($55.59 million) last week from Rp 552.97 billion the previous week.
Blue chip stocks ended mixed last week with state-owned telecommunications firm PT Telkom falling Rp 100 to Rp 4,125 while satellite operator Indosat slumped Rp 750 to Rp 13,650.
However, cigarette maker Gudang Garam rose Rp 825 to Rp 11,600, HM Sampoerna Rp 550 to Rp 6,350, car producer Astra International Rp 75 to Rp 1,850 and toll road operator Citra Marga Nusaphala Persada, controlled by President Soeharto's eldest daughter Siti Hardiyanti Rukmana who is also minister of social services, Rp 125 to Rp 750. (aly)