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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

Stocks To Watch

Smoke Gets In Your Eyes
Sorting the winners from the losers in Indonesia

By Tim Healy and Ellen White / Singapore


INVESTING EXPERTS AGREE THAT timing the bottom of a depressed market is difficult. But here's a clue: If you're interested in taking a chance on the Jakarta Stock Exchange, watch the Singaporeans. Rajeev Malik, a regional economist with Jardine Fleming in Singapore, says Lion City investors have capital and the desire to invest it: "Singapore is like a rich kid ready to go on a shopping spree."

Desmond Lim, director of the city-state's Lim & Tan Securities, says he expects investors from his home to take the lead throughout the region: "Where else is there for us to go? We know this market." And if the depth of the fall suggests the potential for a rebound, Indonesia represents the best opportunity. But identifying the companies that will be in demand won't be easy. That is why it might pay to listen to what some Singaporean experts are saying about which stocks to watch and which to avoid.

Indonesia's cement sector has been touted as one broad segment likely to see mergers and acquisitions. But Steve Partono of the Singapore office of Goldman Sachs doubts that one of the nation's big three cement producers, Semen Cibinong, will be much in demand. He doesn't like the company's $800 million in debt or its 200% debt-to-equity ratio.

However, he acknowledges that some buyers will still look at cement. He says the most likely target is Semen Gresik. He likes the company's management and the fact that 85% of its debt is denominated in rupiah, which makes it not very vulnerable to currency shifts.

Goldman Sachs stock analyst Elaine Tedjojuwono likes Asta Agro Lestari, a plantation company that produces crude palm oil. It went public late last year. She says the company's costs are fixed, and its revenues are in U.S. dollars. She also appreciates the fact that its sales are mostly domestic, which means it won't suffer from an anticipated export tax increase. Some analysts like Sampoerna, the clove cigarette maker. However, the company recently said it has suffered foreign exchange losses of nearly $50 million. How will that affect its desirability? One industry observor said the loss could be written off on taxes.

A high level of mergers and acquisitions contributes to instability -- and opportunity. A stock that looks like a good deal one day may be snapped up the next, and with it the chance to profit from a pre-aquisition stock price. Recently, Hong Kong's Dairy Farm took a 6.6% interest in Hero, Indonesia's largest supermarket chain. Dairy Farm also bought bonds that could be converted into an additional 24.5% stake. Hero reportedly wanted to stop a hostile takeover by the Lippo Group.

On top of all this, consider: We're talking about Indonesia, the region's hardest hit economy and the one where reform looks the most tenuous. Not too long ago, some analysts thought Indofood, the drinks-and-food arm of the giant Salim Group, would be able to pursue a restructuring plan with the proceeds of the sale of a separate Salim unit, the Dutch trading company Hagemeyer. Salim has a 20% stake in Hong Kong-based First Pacific, which sold Hagemeyer. But Partono says Indofood may not benefit because it is corporately distinct from First Pacific. Maybe the best strategy is to wait a little longer -- just like the Singaporeans.

Chart data from when companies were listed. All money values in U.S. dollars except share prices, which are in Malaysian ringgit. Sources: Asiaweek Research, Datastream, First Call/World Equities


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