Stocks, rupiah close higher on Habibie's dimming hopes

JAKARTA (JP): Share prices and the rupiah gained ground on Tuesday in active trading following a decision by Armed Forces chief Gen. Wiranto's refusal to run as President B.J. Habibie's running mate in the elections this week.

Financial analysts said that Wiranto's decision, a major blow to Habibie's chance in the presidential election, led to active trading in the stock and money markets.

"Expectation that Habibie will lose in the presidential election certainly fueled trading activities," a securities dealer said.

At the close of trading the JSX index gained 30.43 points, or 5.5 percent, to close at 583.64 in active trading with 993 million shares worth Rp 1.17 trillion changing hands. Gainers well exceeded decliners 160 to 5, with 104 stocks ending unchanged.

The rupiah was moving in tandem with the JSX index.

The rupiah closed 4.2 percent higher at a six-week high of Rp 7,573, compared to the previous day's close of Rp 7,890.

"The strengthening of the rupiah was a prerequisite to sustain the recovery process of Indonesia's capital market," one forex dealer said.

Vonny Juwono from PT Trimegah Securindolestari said that Wiranto's refusal to take up Habibie's running mate offer had reassured strained market sentiment.

Also reducing Habibie's chances are expectations that his widely criticized accountability speech will be rejected. If the speech is rejected, Habibie's chances of winning the presidential election will be even slimmer.

The People's Consultative Assembly (MPR) is scheduled to hold a plenary session on Wednesday to elect the country's new president. Habibie will compete against Megawati Soekarnoputri and Abdurrahman "Gus Dur" Wahid.

Analysts said that a move earlier in the day by the Supreme Audit Agency (BPK) to approve the release of a report on the Bank Bali corruption scandal to the House of the Representatives also pleased the market.

The move, which would lead to the resumption of suspended aid payments from the International Monetary Fund (IMF) and the World Bank to a cash-strapped Indonesia, was another crucial factor in the rejuvenated trading activities.

The Supreme Audit Agency earlier refused to release in full the audit results on the Bank Bali scandal, which allegedly involved Habibie's inner circle. The agency had said the disclosure would breach the bank secrecy law. The agency released a summary of the audit report, but the IMF and WB objected to the decision and delayed aid disbursement.

"The decision to disclose the scandal is certainly good news for Habibie's opponents. If Habibie's close aides were really involved in the scandal, he is finished," one analyst said.

M. Aidil, an analyst at Fander Securities, said big capitalized companies' shares (big caps) contributed significantly to the surge of yesterday's index.

"Telkom (the state-owned telecommunications company) rose by Rp 200 on heavy trading volume, and had contributed about 7 points to the JSX index," he said.

Aidil said cigarettemaker PT H.M. Sampoerna also contributed significantly to the higher index on its Rp 1,300 fat gains on Tuesday.

He said the positive political news had pushed the index higher following an unusually high daily trading volume of over Rp 1 trillion.

For the past few weeks the daily trading volume has remained constant at about Rp 500 billion.

"Considering the improving political developments, local investors have begun to think that it is now safe to be in the buying position," he said.

Their perception was supported by the fact that it was high time for a technical rebound for the JSX after it had lost points consecutively over the past few days.

However Aidil said that only local investors had been active in the market.

"Maybe after the presidential poll foreign investors will join the bandwagon," he said, adding that he was assuming that the next president would be a reformist one.

"If this happened, we would see the index, as previously predicted by many, breach the 800 level at the end of the year."

Aidil said that when the presidential poll was over and the rupiah was strengthening, foreign investors would reenter the market and enable JSX daily trading value to reach Rp 1 trillion.

"This is the time when we could really use a long-term outlook for our equity investment here," he said. (udi)