Telkom, Mandiri push stock index down

Telkom, Mandiri push stock index down

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Stock Index dropped sharply on Tuesday following
an announcement that state-owned telecommunications company PT
Telekomunikasi Indonesia (Telkom) once again failed to fulfill a
promise to complete its controversial reaudit of its 2002
financial report.

In addition, plans by the government to start selling a 10
percent stake in Bank Mandiri, the country's largest bank in
terms of assets, in the first quarter of this year also
contributed to the stock market decline.

The Index fell by 1.8 percent or 14.38 points to 772.49 from
786.87, the bourse's highest record since its inception in 1982.

"The drop was mainly driven by an accounting problem in
bluechip Telkom, and the government's plan to start the second
public offering of Mandiri," said stock analyst Fendi Susiyanto
from BNI Securities.

Telkom is the largest counter on the Jakarta Stock Exchange
(JSX) accounting for 17 percent of the market capitalization, and
Mandiri is the fourth largest with 5.8 percent.

Fendi explained that the audit issue had prevented Telkom
shares from surging higher, which it has been doing since mid-
2003, with the company continually promising investors that it
would settle the problem immediately.

Telkom shares ended 2.5 percent lower, or Rp 200 to Rp 7,850,
after the company reported to the JSX that its auditor
PricewaterhouseCoopers would not be able to complete the reaudit
of Telkom's 2002 financial report by the end of January as
planned.

Telkom said in the report: "Since the outstanding accounting
issues between Telkom and the auditors have been resolved and
agreed, the company expects to be able to finalize its financial
statement and file its 2002 Form 20-F by the middle of February."

In reply to the report, Fendi said: "It is becoming harder and
harder for investors to believe that Telkom will keep its promise
this time. Such broken promises will only tarnish the company's
image."

The problems with Telkom's 2002 financial report emerged after
the U.S. Securities and Exchange (SEC) rejected an earlier filing
because the report was audited by an Indonesian accounting firm
which was not properly registered in the U.S.

The SEC has demanded that Telkom, which is also listed on the
New York Stock Exchange, resubmit its 2002 report as soon as
possible or risk being delisted.

Elsewhere, bluechip Mandiri ended the day lower by 12 percent,
or Rp 175 to Rp 1,325, the biggest percentage drop since the
shares have been traded on the JSX, beginning in June last year.

Fendi explained that investors were unloading Mandiri shares
for profit-taking because the inflow of new shares would affect
the price. Moreover, Mandiri shares were now considered to be
somewhat overvalued, as a more realistic value should be in the
Rp 1,200 range.

Other bluechips, such as consumer goods company PT Unilever
Indonesia and cigarette producer PT Gudang Garam also dropped on
profit-taking.

Gudang Garam, the second largest counter with 6.4 percent,
fell by Rp 200 to Rp 15,400, while Unilever, the third largest
counter with 6.3 percent, declined by Rp 100 to Rp 3,800.

Several analysts believed that the current bird flu outbreak
in the country had not affected the Index much as there have been
no human cases here.