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)