Financial markets extend their gains on IMF loan news

JAKARTA (JP): The Indonesian financial markets extended their gains yesterday, with the rupiah improving to 14,350 against the dollar and stock prices rising 0.7 percent on the back of stronger regional markets and improving domestic sentiment, analysts said.

They said most regional currencies and stock markets were firmer yesterday, giving a boost to the domestic market which was already on an upward trend due to a number of pieces of good news.

News which brightened the day included the positive market reaction to the Indonesian interbank debt settlement proposal and President B.J. Habibie's optimism that the International Monetary Fund (IMF) would release the next US$1 billion installment of loans which it has agreed to provide to Indonesia.

"All news was positive today and the market also reacted positively. But I don't know how long this positive sentiment will last," a currency dealer with a local private bank said.

He said the rupiah strengthened Rp 200 to close at 14,300/400 against the U.S. dollar on the Jakarta spot market yesterday, up from Tuesday's close of 14,550.

The relative strength of the rupiah was also supported by Bank Indonesia's determination to maintain the interest rates payable on its one month promissory notes at 70 percent per annum, the dealer said.

Nevertheless, the strengthening Japanese yen and news about possible resumption of payments from the IMF dominated the market, he said.

The IMF's executive board met yesterday in Washington and was widely expected to authorize the release of the next $1 billion tranche of aid to Indonesia.

Looking ahead, dealers said the release of the money could lead to a further strengthening in the rupiah, but dollar buying by local banks to finance imports would prevent a spectacular rally.

A stronger rupiah and the improving regional market caused share prices on the Jakarta Stock Exchange (JSX) to gain 0.7 percent, with the JSX Composite Index rising 3.465 points to close at 467.339.

Trading turnover totaled 463.45 million shares with a value of Rp 550.36 billion (US$38.8 million).

Gainers led losers by 68 to 33, with 89 stocks unchanged.

Stockbrokers said local investors dominated trade, buying in the morning and then taking profits in the afternoon.

Pentasena Arthasentosa's head of research Mohammad Syahrial said local investors chased stocks in state mining firm PT Aneka Tambang and state cementmaker PT Semen Gresik.

"Buying euphoria on Aneka Tambang and Semen Gresik also contributed to the rise in the main price index today (yesterday)," Syahrial said.

Trading in Aneka Tambang shares was spurred on last week by rumors that the government has found a foreign buyer for its stake in the company. But an official at the State Enterprises Ministry said on Tuesday that this was not true.

Shares in Aneka Tambang were again actively traded yesterday amid rumors that it would be merged with state tin mining company PT Tambang Timah, brokers said.

Aneka Tambang shares rose Rp 50 to close at Rp 2,525 on 68.9 million shares changing hands.

Syahrial noted that based on his analysis using a "discounted free cash-flow" approach, Aneka Tambang should be priced at around Rp 3,000 per share.

Stockbrokers said local investors chased Semen Gresik stock after it was rumored that three new bidders for the company had offered higher prices than the bid submitted by Mexico's Cemex SA for the government's stake in the company.

Cemex had offered $1.38 per share for the 35 percent government stake in Semen Gresik.

Semen Gresik gained Rp 350 to close at Rp 11,950 on 1.3 million shares traded.

Besides domestic investors's speculative trading on the two stocks, Syahrial said that foreign investors were also buying into "defensive stocks," namely stocks of companies in the consumer, mining, retail, and pulp and paper sectors.

Nevertheless, Syahrial warned of a possible downturn in the market because "fundamentally the market is quite expensive now."

Large-cap stocks had mixed fortunes yesterday, with state domestic telephone monopoly PT Telkom slipping Rp 25 to Rp 4,350, state satellite operator PT Indosat dipping Rp 350 to Rp 15,500.

Cigarette giant PT Gudang Garam was down Rp 150 to Rp 8,200, while rival PT HM Sampoerna rose Rp 100 to Rp 2,500. (rid)