Stocks slump on huge sell-off of Salim stocks
Stocks slump on huge sell-off of Salim stocks
JAKARTA (JP): Share prices on the Jakarta Stock Exchange (JSX)
lost almost 4 percent yesterday, driven by massive sell-off of
stocks connected to the Salim Group, stockbrokers said.
The rupiah stayed flat at 10,500 in lackluster trading as the
market remained confused by indications on interest rate
directions, currency dealers reported.
Stockbrokers said the continuing deposit run on the country's
largest bank, Bank Central Asia, which is considered the Salim
Group's "jewel", prompted investors to dump stocks associated
with the conglomerate.
"The massive sell-off of stocks related to Salim like Indofood
and Indocement have dragged down the market. People are nervous
about holding those sensitive stocks," said a stockbroker with a
joint-venture securities house.
JSX Composite Index dropped 3.9 percent, or 17.092 points, to
close at 416.967, with total trading volume of 261 million shares
worth Rp 234 billion (US$22.3 million).
Losers outnumbered gainers by 117 to 25 with 53 counters
unchanged.
Food producer giant PT Indofood Sukses Makmur and cement
producer PT Indocement Tunggal Prakarsa, both controlled by the
Salim Group, dropped significantly.
The Salim Group is controlled by Sudono Salim, also known as
Liem Sioe Liong, a close business associate of former president
Soeharto.
Indofood was suspended in afternoon trading after falling 30.9
percent, or Rp 750, to Rp 1,675 on 9.03 million shares traded.
Indocement also dropped Rp 100 to Rp 2,900 on 263,000 shares
traded.
A securities analyst at DBS Securities Indonesia, Michael
Gilmore, said the market was extremely vulnerable to rumors
following the ousting of Soeharto from the presidency last week.
"This drop is very rumor-driven as the market is very
susceptible to rumors given the factors of the instability of
last two weeks."
Rumors related to sensitive business groups, though very
unreliable, could move the market, he added.
He said companies with strong links with Soeharto and his
cronies could suffer in the near term as the movement against
corruption, collusion and nepotism gained momentum.
"We all know a lot of big companies have been strengthened by
connections with the first family (Soeharto). And those
connections are now worth nothing, and it will take time for
those companies to reestablish their strength or establish new
strength."
The movement against corruption, collusion and nepotism in
businesses would eventually create good, efficient companies in
two to three years time, he said.
Some analysts said the outlook of the rupiah and stock market
would continue to be bleak until the date of general elections
was set.
Currency dealers said the rupiah was hardly traded yesterday
on the local market as most operators took a wait and see
strategy amid the current uncertainty.
The rupiah was practically unmoved from the opening. It closed
at 10,450/10,550 against the U.S. dollar on the Jakarta spot
market, exactly the same with the previous day's close of 10,500.
"Market players were unmoved by talks about the possibility of
interest rate cut by Bank Indonesia as indications for such a
rate cut were not strong enough," a local bank dealer said.
"Nevertheless, the fate of the rupiah now is not anymore
determined by interest rates but more by political factors."
He forecast the rupiah could strengthen in the near future
even if the central bank cut its benchmark interest rates
provided that political reforms proceeded smoothly.
Dealers said current negotiations between the International
Monetary Fund and government officials would also dictate the
direction of the rupiah.
"If the fund decided to resume its loans to Indonesia, we can
expect that the rupiah would strengthen again to cross the 10,000
level," another local bank dealer said. (rid)