Jalil Hamid, Jakarta – Indonesia's struggling stocks are bracing for rougher times because of a growing anti-US mood in the country, the world's most populous Muslim nation.
Jakarta shares, already one of fund managers' least loved markets, have fallen to attractive levels after the September 11 attacks on US cities that has left almost 7,000 people dead or missing and presumed dead.
Hundreds of hardline Muslims at the weekend raided hotels and an airport in the tourist city of Solo in search of Americans. Others have vowed to declare a holy war on America if it launches revenge strikes on Islamic Afghanistan and hundreds have signed up to fight with Islamic Afghanistan against any foreign attack.
The United States is threatening to strike Afghanistan in its hunt for Saudi militant Osama bin Laden, the man Washington believes was behind the attacks.
"We want foreign investors to come in, but such sweepings can reduced their interest," said a Jakarta stockbroker referring to the hunt for Americans. Foreign funds form just 10-12 percent of Jakarta's market capitalisation of $24 billion.
The composite index .JKSE> was down 1.46 percent at 0650 GMT to a 14-month low of 395.180. Since the attacks, it has lost more than 10 percent, making it cheaper than some of its Asian peers.
Major funds said investors remained wary of the potential fallout of the attacks and its impact on the economy. "Although stock markets in Asia are reflecting levels of value, investors are weighing up their options as to whether they want to be invested given the uncertainties on the whole," said Robert Penaloza, a fund manager at Aberdeen Asset Management.
Good value
Economic worries also kept most foreigners out of Indonesia although fundamentally, some of its blue-chip companies were financially sound and offered good value. "I don't see any new money coming in at least until the end of this year," said Hazrina Ratna Dewi, a fund manager at Messpierson Finas Investment Management
A sharp global slowdown could hamper the cash-strapped government's asset sales programme and speed up economic reforms. Already the government was seeking to delay the sale of a 51 percent stake in largest cement maker Semen Gresik to Mexico's Cemex amid fear of foreign control.
But the move could further slow inflow of Indonesia's foreign direct investments. "The $400 million IMF loan disbursement doesn't mean much if there are no new strategic foreign investors coming in," said Ratna Dewi, who helps manage $160 million in funds. She said tobacco stocks Gudang Garam and Sampoerna and retailers Ramayana and Matahari Putra were her top picks.
Phuah Lee Kerk, a fund manager at APS Asset Management in Singapore, managing more than $200 million, said he has avoided Indonesia since 1998 when the political and economic crises erupted. "We think it needs some time for the situation to stabilise. We want to see whether President Megawati (Sukanorputri) can stabilise the country," he said.
Megawati's election two months ago after her predecessor was sacked, has helped restore political stability but she faces rising anti-US passions among Muslims.
The US State Department on Wednesday, citing safety concerns, advised Americans to put off any plans to travel to Indonesia and authorised the evacuation of non-emergency US government staff and family members.
Indonesia, rich in oil and gold, may be one of the few emerging markets less vulnerable to the sharp swings on Wall Street. But the economy could still feel the pinch, with growth officially forecast to slow to 3.5 percent this year from 4.7 percent last year. Growth could be flat at 3.7 percent next year, said Harry Su, head of research at BNP Paribas Peregrine.
The brokerage this week lowered its gross domestic gross (GDP) forecast for 2002 to 3.7 percent from 4.5 percent and cut Indonesia's corporate sales growth forecasts to 12.9 percent from 15 percent.