Indonesia's capital market has coped well amid a global financial storm thanks to its natural resources, but the country lacks quality companies to invest in, economists say.

"Indonesia is actually doing better than stock markets in many other countries at the moment, although it is down compared to last year's results," Tim Leissner, co-president of Goldman Sachs, said in a discussion organized by the Indonesian Young Entrepreneur Association in Jakarta on Thursday.

He said Indonesia was able to rely on its natural resources amid a period of deflationary pressure from a suffering housing market and lower consumption in the US, and inflationary pressure from higher commodity and energy prices.

The Indonesia Stock Exchange (IDX) composite index fell 91.86 points, or 3.9 percent, to 2,286.61 on Friday from a day earlier.

According to Bloomberg, the index has declined 19 percent since its Jan. 9 2008 record high.

The near-20 percent drop signals the beginning of a bear market, similar to that experienced since Tuesday by the Dow Jones Industrial Average.

The U.K.'s FTSE 100 Index briefly slipped into a bear market Thursday.

Despite its resilience, the IDX lacks quality resource and energy producing companies, Leissner said.

However, Indonesia has benefited from economic positives, including an increasing number of strategic investments, increasing income and a relatively stable political environment.

"Political stability is very important for the investment environment. If you want to attract foreign capital flow, you have to create an environment that welcomes capital because capital today can go anywhere in the world," he said.

Leissner said ASEAN countries should team up to consolidate their capital markets and build a league that serves as a one-stop market to offer more choices and easier access for foreign investors.

Also speaking at the discussion, Goldman Sachs managing director Christopher Eoyang said controlling inflation was key to maintaining foreign investor confidence.

Investors from developed countries, he said, were worried policy makers would not be able to curb rising inflation in emerging countries.

"The aggressive examples are Vietnam, Pakistan, Venezuela and Turkey, which have received aggressive investment, but are not doing very well. So the large funds around the world say 'I have four examples where they do not work out, maybe I should be more prudent'."

"Investment bankers are recapitalizing their funds and transferring them to other Europe state areas. For the foreseeable future, relative to previous years, investment conducted by developed countries in emerging market will be lower."

Oeyang said investors would still invest in emerging markets because of the higher yield growth but at a lesser speed.

"I think people will take a step back."(mri)

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