Stocks, rupiah close higher on Habibie's dimming hopes

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)