Stock index falls; Banks, Inco Drop<\/p>\n
Arijit Ghosh, Bloomberg\/Jakarta<\/p>\n
Indonesia's key stock index fell to a six-week low on concern
\nthe central bank will raise interest rates further this year to
\ncontrol inflation, which is at a six- year high. PT Bank Mandiri
\nled lenders lower.<\/p>\n
Rising rates mean "the bottom line will decline significantly"
\nfor lenders such as Mandiri, said Irvin Patmadiwiria, Jakarta-
\nbased head of research at PT Batavia Prosperindo Aset Manajemen,
\nwhich manages the equivalent of US$35 million. He has sold all
\nhis bank stocks.<\/p>\n
PT International Nickel Indonesia, a unit of Inco Ltd., had
\nits biggest decline in 18 months after investment banks such as
\nJPMorgan Chase & Co. cut their price estimates for the metal.<\/p>\n
The Jakarta Composite Index lost 14.71, or 1.4 percent, to
\n1028.98 at the 4 p.m. close, its lowest since Sept. 28. About
\nfour shares fell for each one that rose. The measure fell 3.4
\npercent this week.<\/p>\n
"The index doesn't look cheap at this level," said Mulia
\nSantoso, research manager in Jakarta at PT Bank Negara
\nIndonesia's pension fund, which manages the equivalent of $300
\nmillion in assets. It "must fall below 1,000 before we will
\ndecide to buy stocks."<\/p>\n
Bank Mandiri, the nation's biggest lender, fell Rp 50, or 3.8
\npercent, to Rp 1,260. Smaller rival PT bank Danamon dropped
\nRp 125, or 3.4 percent, to Rp 3,550. The banking index, which
\ntracks 64 financial-related stocks, accounted for 18 percent of
\nthe main benchmark's decline yesterday.<\/p>\n
The banking measure has dropped 4.3 percent since Nov. 1, the
\nday the central bank raised its benchmark interest rate for the
\nfifth time in nine weeks to rein in inflation.<\/p>\n
Batavia Prosperindo's Patmadiwiria has about 25 percent of his
\nassets in cash from about 15 percent a month ago. "I have
\nincreased cash significantly because I am afraid there will be
\nredemption as the market declines," he said.<\/p>\n
Consumer prices in Southeast Asia's largest economy climbed
\n17.9 percent in October from a year earlier, the Central
\nStatistics Bureau said Nov. 1. That was the highest since June
\n1999 and followed the government's move to more than double fuel
\nprices on Oct. 1 to cut subsidy costs.<\/p>\n
The current benchmark interest rate of 12.25 percent is still
\nlower than inflation, signaling to investors the bank still has
\nroom to increase lending costs.<\/p>\n
"We're expecting the Bank Indonesia rate to rise to 13 1\/4
\npercent by the end of 2005," said Joseph Tan, an economist at
\nStandard Chartered Plc in Singapore.<\/p>\n
PT Gudang Garam, the nation's biggest cigarette maker, slid on
\nconcern higher inflation will reduce tobacco consumption. The
\nstock fell Rp 350, or 3.4 percent, to Rp 10,050. PT Unilever
\nIndonesia, the local unit of the world's biggest maker of
\ndetergent and shampoo, fell Rp 125, or 2.7 percent, to Rp 4,450.<\/p>\n
"Short-term pain inflicted by an inflationary spike will hurt
\nprofitability in the near term," Erwan Teguh, research head at PT
\nDanareksa Sekuritas, wrote in a note to investors today.
\n"Consumer companies and banks will bear most of the brunt."<\/p>\n
International Nickel Indonesia, plunged Rp 1,100,or 8.6
\npercent, to Rp 1,750, its biggest decline since May 17, 2004.
\nJPMorgan, the third-biggest U.S. bank, on Nov. 8 cut its average
\nnickel estimate for 2006 by 5.2 percent to $5.465 a pound. ABN
\nAmro Holding NV, the biggest Dutch bank, on Nov. 7 forecast
\nnickel fetching an average $5.30 a pound, 21 percent lower than
\nestimated this year.<\/p>\n
The stock has declined 16.6 percent in the past three days on
\nconcern profit may decline on lower output and prices. Net income
\ndeclined 17 percent to $73.2 million in the three months to Sept.
\n30 from $87.95 million a year earlier, the Jakarta-based company
\nsaid on Oct. 26. Sales fell 5.8 percent to $219.4 million.<\/p>",
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