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Thursday, June 10, 1999 Published at 09:50 GMT 10:50 UK

Business: The Economy

Slow vote count hits Indonesian stocks

An official sees a projected count, by President BJ Habibe's picture

The slow rate of vote-counting in Indonesia's historic election has hit the country's stock market.

Stocks slid 3% in on Thursday after shedding 1.2% on Wednesday.

Indonesia Flashpoints
Euphoria over Indonesia's transition to democracy - and a lack of violence - had helped the market soar 12% on Tuesday, the day after polling day. This took the market's benchmark index to its highest level for 22 months.

But investors are now nervous that public anger over the slow count could turn violent.

They are also concerned at fears that the ruling Golkar Party - under which President Suharto ruled virtually unchallenged - could regain power. The party made large gains, according to initial reports.

"Market players are starting to worry because the people would not want this party (Golkar) to win," said Laksono Widodo, head of research at ING Barings Securities.

[ image: Trading was buoyant for two days after Indonesia's poll]
Trading was buoyant for two days after Indonesia's poll
The Jakarta composite index JKSE was down by 21.742 points to 657.228 at 0500 GMT.

But many analysts believe the index will rise again after the results of the election have been announced.

This year, Indonesia has been the best-performing Asian stock market, chalking up a gain of about 70%. Seoul is in second place, with a rise of around 50%.

A Jakarta Stock Exchange spokesman said: "I'm sure enough that the market is still quite bullish."

Asian fund managers say the Indonesian stock market offers plenty of opportunity for long-term investors.

The election was billed as the most free in Indonesia for 44 years and the country could become the world's third largest democracy.

Singapore hits high

Fund managers point out that inflation of 100% has distorted the value of the composite index, which remains down more than 50% from its pre-crisis high in US-dollar terms.

In contrast, Singapore shares have powered ahead to trade at the highest level in more than two years.

The benchmark Straits Times Index hit a high of 2,044.42 points.

Traders said the rise was built on a flow of cash into the market after the index broke through the key psychological level of 2,000 on Wednesday.

The fund flow appeared mixed from both retail investors and institutions as they welcomed the peaceful proceedings in Indonesia, dealers said.

One local broker said: "Institutional investors, who have been holding back on fears of possible electoral violence in Indonesia, are back in the market as events in Indonesia have so far been peaceful."

In 1998, student protests and deadly riots forced n President Suharto to quit after 32 years in power.

The election for 462 seats in Parliament is the first step towards democracy. A new president will be elected later this year.

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