Wed, 06 Aug 2003

Stocks plunge to two-month low after Marriot bombing

Rendi A. Witular, The Jakarta Post, Jakarta

Jakarta shares and the rupiah were badly hit by the deadly bomb blast at the JW Marriott Hotel in Central Jakarta in the worst terrorist attack in the capital since the blast at the Jakarta Stock Exchange building in 2000.

The Jakarta stock index plunged on Tuesday to its lowest level in more than two months as frightened investors unloaded shares immediately after trading resumed in afternoon session. The bomb blast happened at lunch break.

The index dropped by 3.1 percent to 488.52 from 503.94 in the previous day.

In the currency market, the rupiah closed 2.1 percent lower against the U.S. dollar at Rp 8,665 from Rp 8,490 on Monday.

However, some analysts said the pressure on shares and the rupiah would likely be short-lived as investors had already gained experience from last year's Bali bomb blasts, and the fact that Tuesday incident was not as massive as the Bali tragedy.

"It will be a short panic selling. If you meticulously see the trade record of stocks on Tuesday, you will find that foreign investors are still confident about the country's economic prospect," said an analyst at a state-owned securities house.

Foreign-affiliated broker firms such as JP Morgan Securities DBS Vickers Securities and CLSA (Credit Lyonnais Securities Asia) Indonesia helped the Index bounced back from its two-and-a-half month low of 479.820 by making late afternoon buying, the analyst said.

JP Morgan, for example, bought around 15 million shares of blue chip state-owned telecommunications company PT Telekomunikasi Indonesia (Telkom) worth Rp 61.8 billion ($7.1 million) and help avoid the bourse from suffering a further drop. But Telkom shares closed at Rp 4,125, down from Rp 4,300 on Monday, amid the overall depressed market sentiment.

DBS Vickers was also seen buying 910,500 shares in blue chip cigarette producer PT Gudang Garam worth about Rp 7.9 billion. Nevertheless, Gudang Garam shares ended lower at Rp 8,650 from Rp 8,950 in the previous day.

The analyst explained that at their current prices, many blue chip stocks had become attractively cheap. Bargain hunters might entered the market soon, which could prevent the stock index from a sharp drop or might even prompt a mild rebound.

"There will be a further weakening but not that worrisome. The market will draw experiences from the tragedy when the market fell drastically by 38.99 points to end at 337.47 a day after the Bali bombing," he said adding that the index would not break the 480 level.

Meanwhile, currency analyst Pardi Kendy from Bank Buana told The Jakarta Post that the incident proved that there was a serious problem in the country's security conditions, which the government failed to overcome.

However, he explained that the market's experience from the Bali bombing incident would help avoid a widespread panic in the currency market.

"This is a serious problem, but it is not as huge and explosive as the Bali bombing. The market can somehow learn from their experience again," said Pardi adding that the rupiah would likely to hover at around Rp 8,550 to Rp 8,650 this week.

He also said that the market was now looking to the government to show concrete actions against terrorist threat such as those taken after the Bali bombing to help ease the worries.

The rupiah and the Jakarta stock market have been one of the best performers in the region during the first half of this year, although recently there have been signs of weakening in the two amid increasing confidence in the U.S. economy.