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

To: Duke who wrote (276)	2/7/1998 9:50:00 PM
From: Rational	Read Replies (4) \| Respond to of 947

To all and Tom in particular: The fact that a devaluation in Rp has shrunk the USD price of TLK to 25% of the price before devaluation is an indication of an efficient market. Rp value is 25% of what it used to be when TLK was $37. Thus, Tom, what you say makes sense and the market price reflects it. Telkom's Rp price would have risen 4-fold had the Indo govt permitted revenue increases in USD terms and the TLK's USD price would not have changed much. These are all obvious calculations. I see two things happening here on. First, I expect Rp value to rise to the 4000-5000 Rp per USD rate soon, as indicated by Mr. Yen of Japan. Japan and Singapore will have achieved this goal by now, had Suharto not indicated Habbie as his nominee soon after signing the IMF deal around Jan 15 when Suharto's commitment to reforms was perceived to be doubtful. The real risk for Japan and Singapore to bolster Rp was that Suharto could turn on the Rp printing press while Japan and Singapore bought Rp. But, the above scary scenario that drove Rp down to 17000 is gone (IMHO), irrespective of the VP. This is because: * Suharto has been unequivocally supporting the reforms as indicated by concrete steps; * IMF is virtually setting the monetary policy in Jakarta; * all the support for Rp is coming from BI while Japan and Singapore are lending Indonesia -- this means that BI knows printing more Rp is meaningless and so it should rather restore Rp to a value sustainable in the market place. Thus, if Rp climbs to 5000 level; TLK should go up to $18 even if tariff is not changed. However, not changing the tariff will keep the Jakarta market depressed as Rp price of Telkom stays unchanged (Telkom leads the market); this will make the Indonesian government's reforms appear to be not received by the market. This will force the government to allow Telkom more flexible pricing policies and other reforms to lift up its Rp price and the Jakarta index. I do not think the financial analysts understand any of these future dynamics; or if they do, they may be issuing a downgrade to let their clients buy at lower prices. I take the analysts' ratings with a pinch of salt because they state the obvious and the ratings have a negative correlation with the long-term price performance (I agree with Jyoti on his observation). Sankar