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Technology Stocks : INDONESIA'S PT TELECOM(TLK) -- Ignore unavailable to you. Want to Upgrade?

To: Sandie who wrote (205)	2/3/1998 11:09:00 AM
From: Rational	Respond to of 947

Sandie: The Indo-Chinese are really worried about riots (basically meted against them) due to economic problems and believe that Suharto is incapable of restoring confidence in the financial markets and/or establishing transparency that the markets want. True, the ethnic Chinese enriched themselves due to Suharto who prospered because of Chinese business men and is closely connected (in private) to the Chinese. But, common Indonesians (mostly Muslims) who enjoyed many subsidies, while the rich (including Suharto's children) exploited the national resources, will lose a lot as a result of Rp collapse. It is in the interest of everyone to restore Rp; Suharto wants to do it by remaining at the helm but the Conglomerates want him out or at least want a VP who will represent Indonesian financial interests. I think Suharto has a lot of power and his Children have realized the importance of sacrifices at this moment. Yesterday, Suharto promised that he would do every thing necessary to restore the confidence of the finance markets. This guy speaks very little and has the resolve of a commander who acts more than reacts. He does not want to announce a VP because he believes that he, not the VP, will carry out the reforms and establish his legacy. I believe the critical elements are helps from Japan, Germany, US and Singapore who are eager to help as Suharto is serious. BTW, TLK closed at Rp 5000 in Jakarta and should be at the current exchange rate $9.8 (5000 * 20 /10,200). Now it is at $8 13/16 which is a 12% discount, as compared to 100% premium for most Korean ADRs. The sellers (short-sellers) must be expecting the Rp exchange value to drop significantly due to political factors. There is another factor too. Those who want to destabilize Indonesian financial markets, can heavily short TLK in NYSE; if TLK falls significantly the Jakarta index will fall because TLK drives the index due to its heavy weight. These tricks are being played. After all, Indonesian equity market is less in USD value than most moderately big US companies. I believe, though, this attempt will not succeed because (IMO): * Suharto has understood the game; * Suharto will appoint a VP (not Habbie, nor Tutut) that no one knows of so that Suharto will be seen to be in command; * Suharto will get the cooperation of Japan, Singapore, Germany and US (Singapore PM is visiting Jakarta again) to trigger a panic buying of Rp as they did on Jan 15 resulting in 6700 Rp/USD; this was short-lived because of Habbie emerging as VP; now Suharto says he did not set the criteria that the market took to infer Habbie as the VP; it was set by the Golkar party. There is a big risk to own TLK; but if Rp stabilizes at 5000 as the IMF predicts (Mr. Yen believes in still a stronger Rp), then one can reap a rich return. BTW, IMF has a resident economist in Jakarta and Suharto happens to like and trust this economist (an Indian sounding name). Given that BI has announced upto 100% interest on Rp loans (in the over-night inter-bank lending market), I do not believe that they will resort to printing money. In the worst case, if they print money, values of real assets (like companies) will adjust, albeit via gyrations. It TLK's real value was $36 per share in July 1997, how could this be $9 now? It must be due to deep-seated fears of the market. Even if $36 was driven by irrational exuberance, the real value cannot be so low as $9 for the biggest company serving the fourth largest country in the world. I do not want to put a tag on the true value because I do not know and markets do not always pay the true price; markets are driven by irrational exuberance/panic by herds. Sankar