Stocks plunge to four-year low after terrorist attack

Stocks plunge to four-year low after terrorist attack

The Jakarta Post, Jakarta

The Jakarta Stock Exchange main index plunged on Monday to its
lowest level in four years as investors took fright at the
country's economic prospects following the massive bomb
explosions over the weekend in Bali.

On the currency market, possible Bank Indonesia intervention
helped stemmed the rupiah's slide at 9,330 against the U.S.
dollar, though still much lower than 9,010 on Friday's closing.

Analysts predicted further falls in both markets, as investors
expected more details of the impact of the terrorist strike on
the economy to emerge in the coming days.

"It was panic selling," said stock market analyst Fajar
Hidayat of PT Trimegah Securities. "Investors are concerned at
the impact the terrorist strike will have on the economy."

The Jakarta Stock Exchange (JSX) Composite Index dropped 38.99
points to end at 337.47 in the weakest showing since April 1998.

Worsening the fall, Fajar said, was a weak global market that
in last week's trading had dragged the JSX index down to 378,
from around 400.

But investor worries have now shifted to the local economy
because of the terrorist strike that killed at least 182 people,
mainly foreign tourists.

The tourism sector is one of Indonesia's important economic
growth engines, with its ability to bring in foreign exchange
earnings, spur local tourism businesses and absorb employment.

"Tourism accounts for some 4 percent of our gross domestic
product (GDP)," said Fajar, referring to the total value of
products and services a country produces within a year. "On
average it contributes some US$ 4 billion in foreign exchange
revenue per year."

Stocks fell across the board, led by a 19 percent drop, to Rp
2,400, by market heavyweight PT Telekommunikasi Indonesia, he
said.

According to him, at their current prices, many stocks such as
Telkom had become attractively cheap. Bargain hunting might set
in to stall a further slide in the index or even prompt a mild
rebound.

Drawing from the experience when the market fell for three
straight days after the bombing of the JSX building in 2000,
Fajar predicted a further weakening.

"But I doubt the index will break the 300 level," he said,
estimating that trading over the next few days would be within
the range 328 to 343.

The current level, 337, only comes close to those in April
1998 when the financial crisis was at full steam and the country
was heading for a political showdown between then President
Soeharto and demonstrating students.

Although the economy and political stability have improved
since, neither is stable. Pressure is mounting from the prolonged
global economic downturn as it spells dry export markets and a
worsening of the five-year outflow of foreign capital.

A treasurer at a foreign bank said the rupiah was helped by
Bank Indonesia intervention, which he heard had amounted to $13
million to $15 million.

Piles of foreign debt payments and other U.S. dollar payables
weighed heavy on the rupiah, he said. "People who before had been
waiting to buy the dollar are now rushing into the market."

He said the market was looking to the government to show
concrete signs of its taking action against the terrorist threat.

Halfhearted statements and actions, he said, would only
prolong market anxiety.