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Aberdeen On Jakarta Bombing August 11, 2003
Aberdeen Asia expects the Jakarta bombing to have a limited impact on its portfolios.
Author : Aberdeen Asset Management

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This week's deadly bomb blast at the luxury JW Marriott hotel in Jakarta, Indonesia, shows that terrorism still remains a potent threat in Asia. The modus operandi was similar to last year's bomb blasts in Bali, where close to 200 people died.

As expected, there has been some knee-jerk selling in both domestic stocks and the rupiah. The Jakarta Composite Index plunged close to 5% and the rupiah dropped to 8,670 against the US dollar in the aftermath of the blast. Regional markets also experienced some selling, especially in the Philippines, where sentiment had already been hit from last week's mutiny.

Risk premiums in Indonesia are bound to rise in the short term, with domestic financial markets vulnerable to further profit taking. In addition, inbound tourism and business plans may be put on hold for the time being. But the incident is not likely to materially affect investor sentiment for an extended period.


Investing in Indonesia has always carried with it an element of risk and volatility. Just as markets discounted the uncertainty surrounding the overthrow of the Suharto regime in 1998, and again in October 2002 following the Ball attacks, the fallout from the latest bombing will also be factored into share prices.

The latest incident may finally force the Megawati administration into taking a tough stand against terrorism. In many ways, her reticence can be attributed to a lack of concrete knowledge on the extremist factions, as well as a general reluctance to accept US claims that Indonesia is a likely terrorist base.


More importantly, the latest bombing reinforces our belief that careful stock selection is essential when investing in Indonesia. We only invest in companies after intensive research and thorough analysis of their balance sheets, and even then only if they seem reasonably priced.

We find the best value in consumer companies, select financial stocks and local subsidiaries of leading multinationals. Examples of these include Sepatu Bata, a shoe manufacturer, Unilever Indonesia, a leading household goods company, Dynaplast, a plastics packaging company and Mustika Ratu, a cosmetics manufacturer. Among the financial stocks we own are Bank NISP and Bank Pan Indonesia.

We believe that making money in Indonesia involves staying committed for the long haul. This is one of the main characteristics of our fund. Indeed, quite a few of our holdings - like Dynaplast and Mustika Ratu - have been held since inception.


We expect the Jakarta bombing to have a limited impact on our portfolios. Indonesia has a 3.5% weighting in most of our regional portfolios against the benchmark MSCI AC Asia Pacific ex-Japan weighting of 1.1%. The same applies for our single country fund, which remains defensively positioned with a current dividend yield on the portfolio of 7%. We remain positive on Indonesia's long term economic fundamentals, and are not reducing our weighting in the country as a result of the bombing.

The above is strictly for information purposes only and should not be considered as an offer, or soliditaflon, to deal in the Aberdeen Select Porgolio ('the unit trust') or any of the investments mentioned herein. Investments in the unit trust are not deposits or other obligations of, or guaranteed or insured by Aberdeen Asset Management Asia Limited ('the ManageC) and are subject to investment risks, including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. The Managees past performance is not indicative of its future performance and unit prices can go up or down. All applications for units in the unit trust must be made on the application form accompanying the prospectus. Investors should read the prospectus for details. Any forecast made herein is not necessarily indicative of the future or likely performance of the unit trust. The Manager does not warrant the accuracy, adequacy or completeness of the information and materials contained in this document and expressly disclaims liability for errors or omissions in such inforrnaflon and materials. Any research or analysis used in the preparation of this document has been procured by the Manager for its own use and may have been acted on for its own purpose. The results thus obtained are made available only coincidentally and the information is not guaranteed as to its accuracy. Some of the information in this document may contain projections or other forward looking statements regarding future events or future financial performance of countries, markets or companies. These statements are only predictions and actual events or results may differ materially. The reader must make his/her own assessment of the relevance, accuracy and adequacy of the information contained in this document and make such independent investigations, as helshe may consider necessary or appropriate for the purpose of such assessment. Any opinion or estimate contained in this document is made on a general basis and is not to be relied on by the reader as advice. Neither the Manager nor any of its servants or agents have given any consideration to nor have they or any of them made any investigation of the investment objectives, financial situation or particular need of the reader, any specific person or group of persons. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the reader, any person or group of persons acting on any information, opinion or estimate contained in this document. The Manager reserves the right to make changes and corrections to its opinions expressed in this document at any time, without notice.

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