Too early to gauge Bali fund flow impact

Too early to gauge Bali fund flow impact

Helen Ubels, Dow Jones, Sydney

Weekend bomb blasts in Bali stunned markets in Asia, but stock
markets outside Indonesia were steady overall, with no wholesale
exodus by funds.

However, the longer-term consequences on investment in
Indonesia and the rest of Southeast Asia won't be clear until
more is known, for instance, whether the three Bali bomb blasts
were primarily targeting Westerners or the Indonesian government.

Until more details emerge, investors aren't sure whether this
is a country-specific matter, fund managers say.

No group has yet claimed responsibility for the blasts, which
at the latest tally killed 188 and injured more than 300.
Suspicion has initially fallen on the al-Qaida terrorist group,
and an affiliated group called Jemaah Islamiyah, which wants to
establish a pan-Islamic state across Malaysia, Indonesia and the
Southern Philippines.

"In all of these types of events, it is never the one-off
event that really determines what investment markets do," said
Andrew Fay, regional chief investment officer for Asia-Pacific at
Deutsche Asset Management.

"Sure they have an immediate impact, but it's really whether
its followed through and the course of action taken by
governments" that will dictate the reaction of investment
markets, he said.

Still, in the short term, some markets will be regarded as
more high risk than others, and none more so than Indonesia,
which has already long fallen out of favor with international
investors.

Indonesia's benchmark Jakarta Composite Index tumbled 10.4
percent to close at a four-year low of 337.475 points Monday,
while the rupiah hit a five-month low at Rp 9,350 to the dollar
in the morning.

The blasts in Bali - the center of Indonesia's tourist
industry and a popular destination attracting 1.4 million
foreigners last year - could hurt the Indonesian economy and
influence its politics, according to Standard & Poor's. The
international ratings agency noted that the government's response
to the situation will be critical for policy direction.

"If the government commits to fighting against terrorism,
Jakarta will receive more international support, both economic
and technical," S&P said, adding that the government would have
to balance support for the U.S.-led war on terror with domestic
political concerns.

In general, north Asian markets were stronger than Southeast
Asian ones on Monday. Shares in South Korea and Taiwan finished
4.5 percent and 1.6 percent higher, respectively, still retaining
some warmth from Wall Street's advances Friday.

Singapore's Straits Times Index kept its head above water,
edging up 0.35 percent, while Australia's S&P/ASX 200 index ended
up 1.2 percent.

On the downside, the Kuala Lumpur Composite Index gave up 1.2
percent, the Stock Exchange of Thailand Index lost 2 percent,
while the Philippine Stock Exchange Index slipped 0.44 percent.

The key Japanese and Hong Kong equity markets were closed
Monday for a public holiday.

Equity markets were attracting "a fair amount of risk premium"
before the weekend bomb blasts, due to global economic
uncertainty, political uncertainty linked to worries of a U.S.-
led war against Iraq and concerns about oil prices, said William
Pitman, the Singapore-based head of Asian markets at Henderson
Global Investors, which has around US$2 billion invested in Asia.

"But this is much more specific to our part of the world and
to that extent, I think there is an extra risk premium being put
into the equation," he added.

The broader, longer-term ramifications on regional investment
will depend on whether the Bali attacks are "perceived to be more
of an endemic problem, which it has probably not proved to be
yet," he said.

At Deutsche Asset Management, which has around $71 billion
invested in the Asia-Pacific region, Fay doesn't anticipate any
major fund flow changes.

"As an isolated event it's not driving funds flows, or what
we're going to do in investment," he said.

However, these sorts of events tend to have a negative impact
to a marginal extent on consumer spending patterns, he noted.

"It's a tragedy for so many families that people start to curb
their spending patterns...and in the period we are already in - a
global slowdown - it's obviously not positive."