Wed, 22 Sep 2004

Stocks peak on peaceful election, Susilo lead

Dadan Wijaksana, The Jakarta Post/Jakarta

The Jakarta stock index surged to record levels on Tuesday as investors were buoyed by the smooth election and the imminent victory of Susilo Bambang Yudhoyono, seen by many in the market as more capable than incumbent President Megawati Soekarnoputri of curing the country's economic ills.

The Jakarta Composite Index reached an all-time high of 829.57 points in the morning session, but late profit-taking meant the index retreated to close at 824.86, a 1.13 percent increase compared to Friday's close.

Its previous record high was 818.16 points on April 27.

Although the local stock market had already rallied strongly during the past week, the non-violent run-off on Monday, the final round of the country's first-ever direct presidential election, kept up the bullish sentiment.

Investors were heartened by Susilo's massive lead over Megawati in the provisional tally.

"With (Susilo) leading with such a huge margin, the result should at least mean there is less chance of a dispute about results between the competing parties, which could create jitters to the market," one dealer at a local brokerage said.

Susilo "represents a new face, a new character with charisma," Bloomberg reported, quoting Stephanie Lee, who helps manage US$10 billion in securities at Aberdeen Asset Management in Singapore and holds more Indonesian stocks than are represented in benchmark indexes. "He comes across more assertive with regard to policy-making."

University of Indonesia economist Chatib Basri hoped Susilo was able to maintain his current momentum and would form a credible cabinet.

He acknowledged fixing the structural problems, which have held back economic growth since the late 1997 crisis, could not be done overnight. However, he said the new government should give a signal to the market it was determined to fix the problems.

Susilo is expected to announce key members of his cabinet prior to the official swearing-in ceremony on Oct. 20. Some members within Susilo's inner circle have proposed respected Minister of Finance Boediono to be maintained in the current post.

Bank Lippo president Joseph Luhukay hailed the peaceful process of the election and said confidence was now on the rise in Indonesia's economy.

Blue-chip shares, including telecommunication giants Telkom and Indosat, and Bank Central Asia, were among the most active stocks traded.

Despite the positive sentiment, analysts warned of profit- taking in coming days. They said investors would wait for the announcement of the new cabinet and early signs of whether the new government could deliver on its promises to fight corruption, accelerate key reform programs and encourage economic growth.

Signs of caution were evident on the currency market, where the rupiah lost ground on earlier gains due to profit-taking.

It hit an 11-month high at Rp 8,930 to the greenback earlier in the day, but weakened to close at 9,030; the same level as Friday's close.