Stocks plunged on regional bearish market

Stocks plunged on regional bearish market

JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
plunged for a third consecutive day yesterday on the impact of
regional weakness and uncertainty in the local market.

The JSX composite price index, the main price indicator, fell
12.79 points, or 2.7 percent, to close at 466.11, with 473.4
million shares changing hands at Rp 518.4 billion (US$159.50
million).

Brokers said trading activities were volatile as foreign and
domestic investors dumped blue chip shares on fears that the
legal suit by President Soeharto's son Bambang Trihatmodjo
against the closure of his bank would harm the government's
credibility.

But most analysts believed the bearish condition would
continue due to gloomier prospects of the country's corporate
earnings.

"I think foreign investors stayed out of the market in fear of
deteriorating corporate earnings this year due to the currency
crisis," the head of research at Socgen Crosby Indonesia, Goei
Siauw Hong, told The Jakarta Post yesterday.

He said the IMF bailout package for Indonesia would not
immediately help restore Indonesia's economy in the short term as
the main purpose of the IMF-led package was to improve the
country's long-term economy.

Goei predicted that Indonesian companies with dollar
denominated debts would find it more difficult in the coming
months.

"Major overseas creditors will force Indonesian companies to
change their long-term liabilities to short-term ones," he said.

"The change of these liabilities will create a cash-flow
problem for most companies in Indonesia," he said.

He said the currency crisis would cause an increase in
unemployment as most companies would have to let some of their
employees go due to a lack of liquidity.

"This problem, coupled with the possibility of an intense riot
before the General Assembly in March to elect a new president,
will certainly force foreign investors to track sideways," he
said.

He predicted that the market would continue to see bearish
market conditions until the third quarter next year.

"I think the index will continue to decline in the coming
months and will see a downtrend market sentiment in the first six
months of next year," he said.

A stock dealer said the legal dispute between businesspeople
and the government over bank closures partly contributed to
sluggish trading yesterday.

Bambang Trihatmodjo, who has a 25 percent stake in liquidated
Bank Andromeda, filed a suit against Minister of Finance Mar'ie
Muhammad and Bank Indonesia Governor J. Soedradjad Djiwandono
Wednesday. The President's half-brother Probosutedjo, whose Bank
Jakarta was one of 16 ailing banks closed by the government, also
launched a similar legal battle against the government. (aly)