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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Sizing Up Suharto Shares

Evaluate the companies, not the connections

By Assif Shameen


AMONG THE VICTIMS OF last month's political unrest in Jakarta was a badly bruised bourse. And the worst hit stocks were those directly or indirectly linked to the family of President Suharto. Says a Hong Kong-based fund manager, "Medium-to-long term I am still bullish on Indonesia, but I would rather avoid the stocks linked to the first family." Other analysts say look at the companies, not the connections.

Until a few years ago the multi-billion dollar businesses associated with Suharto's sons Hutomo Mandala Putra (Tommy) and Bambang Trihatmodjo as well as daughter Siti Hardyanti Rukmana (Tutut) were all private. But as their empires grew, so did the need to raise cash and lock in some capital gains -- and go public. Bambang's Bimantara Citra, which includes telecommunications, electronics and automotive businesses is listed as is Tutut's infrastructure company, Citra Marga. In addition, a host of listed companies have one or more first family members or friends as minority shareholders or strategic partners. Finally, companies like Indocement and Indofood are linked to Suharto since they are controlled by his close friend Liem Sioe Liong.

"Since there had been stability in Indonesia for 30 years, foreign investors were taken by surprise," says Stephanus Partono, an analyst for Goldman Sachs in Singapore. "In their mind political instability was the least of Indonesia's worries." Frans van der Horst, head of research at Schroeders Securities in Jakarta, says: "The perceived increase in political risk in Indonesia comes at a time when global investors are very cautious about emerging markets in general. Even before the political problems came to the fore, most global investors were underweight in Indonesia." But, he says, "despite all the press reports, we haven't really seen a big selling spree in Jakarta." Stocks have gone down because there was some selling and hardly any buying.

Partono points out that certain companies are more affected than others. "For some reason investors put a much higher risk premium on stocks like Bimantara and Citra Marga," he says. "That's a bit short-sighted. These are good businesses with bright prospects, and even if Suharto's family doesn't control them, someone will." He thinks Bimantara stock, which plunged nearly 60% from its yearly high "is looking quite attractive now." Though Citra Marga hasn't fallen as hard or as fast as Bimantara, it has dropped more than most stocks, so Partono thinks it too is starting to look good.

But Nomura Securities has a screaming sell on both Bimantara and Citra Marga. In fact, the Japanese broker first recommended selling them months before the political turmoil began. Nomura believes politically sensitive companies as well as some of the large capitalization stocks will remain vulnerable for a while. Still, the securities company is bullish, and advises clients to accumulate Indonesian stocks on weakness.

As for companies linked to Suharto's billionaire buddy Liem Sioe Liong, investors seem to have switched from Indocement as a core holding to Semen Gresik, a state-controlled listed cement player. "It's not just because of Liem, but because Semen Gresik has better earnings growth potential," says Partono. Frans van der Horst advises clients to wait:. "The market may drift sideways and probably has a bit of downside. There is still plenty of time to pick up bargains."


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