Jakarta blasts roil Indonesian stocks, business confidence

17 July 2009 06:45  [Source: ICIS news]

SINGAPORE (ICIS news)--Deadly explosions racked Jakarta on Friday, sending shockwaves to the stock market and the Indonesian capital's business community.

The Jakarta Composite Index fell by as much as 2.7% after blasts were reported at the JW Mariott and Ritz-Carlton hotels early morning with nine fatalities.

Among those killed was Tim Mackay, chief executive of cement company Holcim Indonesia, according to newswire service Reuters.

A third blast on a toll road north of the capital occurred around noon, with two deaths reported, based on media accounts.

“I think the offices close to the Marriott and the Ritz Carlton have been emptied as a precaution. The third explosion on a highway, according to the police, was caused by high explosives,” said a Jakarta-based polymers maker.

There was no immediate claim of responsibility for the attacks.

“We’re concerned [how] this will affect business sentiment here,” said a trader from Tricipta Buana Karsa.

“Money flow is important to us and already we saw pressure earlier in the year. Trading of [commodities] had been hampered. This is not good,” the trader added.

At 1:15pm Singapore time (0515 GMT) , the Jakara composite index was down 25.87 points or 1.22% at 2,092.081.

“It’s quite a natural reaction [for investors] to take [their] funds off the table until there is greater clarity [on the situation],” said Lim Suh Chian, a Singapore-based economist at DBS Bank.

Persisting threats of further terrorist attacks would be the worst possible scenario as this would undermine investors’ confidence in the country, she said.

“If it turns out that this incident is quickly sorted out, then I think investors would do well to remember that fundamentally speaking, Indonesia has actually been a very resilient economic performer,” said Lim.

Indonesia has escaped a technical recession that plagued most of its neighbouring economies in southeast Asia. DBS is projecting the country to post a 4.3% annual GDP growth this year.

“Assuming terrorists are related to this incident, this has been a long-running blight for them [Indonesia] for sometime,” she said.

The country has had strings of terrorist attacks in the past, including the Bali bombings in 2002 suspected to have been carried out by terrorist group Jemaah Islamiyah.

“They [Indonesian government] have made efforts towards arresting some of these Jemaah Islamiyah leaders but unfortunately for Indonesia, this has always been a thorn on its side,” Lim said.

With additional reporting by Steve Tan and Salmon Aidan Lee

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