Student demos cast a shadow over JSX

Student demos cast a shadow over JSX

JAKARTA (JP): Fears of escalating student demonstrations and
reports of looting will continue to cast a shadow on the
country's financial market this week.

Securities analysts said on Friday that such fears would
dampen positive sentiment arising from the latest letter of
intent signed by the government and the International Monetary
Funds.

They said that the agreement, which would allow Indonesia to
receive another $1 billion tranche from the IMF, should have
improved the market sentiment because with the additional fund,
the central bank would have stronger reserves to stabilize the
ailing rupiah.

"But at a time when the political situation is not so
encouraging, such a positive factor will not have an impact on
the market. Fears of unrest will remain the dominant factor,"
head of research of BNI Securities Adrian Lesmana told The
Jakarta Post.

He said that trading activities in the ravaged local market
were no longer based on the fundamental factors of the companies
but rather on social and political situation at home.

"The ups and downs of stock prices in the local market are
determined by political and social uncertainties," he said. A
series of student demonstrations hit Jakarta and Surbaya last
week demanding President B.J. Habibie resign for failing to halt
skyrocketing prices.

Stockbrokers said that the absence of fresh leads, coupled
with first-half devastating financial reports of most companies,
would force most investors to shun Indonesia's market.

"I think most foreign fund managers no longer list Indonesia's
market as an investment spot for foreign investors due to the
political uncertainty here," said head of institutional sales of
Mashill Jaya Securities Antonio Yongnata.

Associate director of state-owned securities house Bahana
Securities, Andre Cita, agreed, saying that improving political
and social instability at home has become a prerequisite for the
government to attract foreign funds.

Gloomy

Though the local market remained gloomy in the short term and
long term, BNI's Adrian said that certain stocks, especially
resources and mining based ones were still worth picking as most
of them generate their revenue in dollars.

"But avoid picking up retail stocks which are sensitive to
riots," he said, pointing out that shops and buildings of
Matahari, Ramayana and Hero were the main looting targets of
angry mobs in the aftermath May riots, which brought down former
president Soeharto.

But Mashill's Antonio did not agree with Adrian, saying that
most investors in the local market are short-term oriented who
base their trading heavily on market sentiment.

"There are no more long-term investors here," he said.

Currency dealers also shared stock analysts' view, saying that
the local foreign exchange market would largely rely on the
development of the political situation at home.

They said that the rupiah, which closed at 11,650 on Friday
last week against 10,850 the previous week, was expected to trade
between 11,800 and 12,000 levels this week.

"The direction of the rupiah has been directed by the
political situation," Robert Z. Toruan, a dealer with Bank Niaga
said on Friday.

He said that the rupiah might nosedive further to above the
12,000 level this week as demand by local companies and banks to
settle their foreign obligations would increase later this month
and fears of a possible social outbreak might occur again.

The JSX Composite Index fell 1.51 points to 324.04 last week
from its close at 325.55 the previous week.

Daily average turnover, however, fell to 182.50 million shares
changing hands last week compared 270.82 million shares the
previous week.

The daily average transaction value, however, remained almost
unchanged at Rp 248.15 billion last week compared to Rp 248.11
billion the previous week. (aly)