Indonesian stock index falls to 4-week low
Indonesian stock index falls to 4-week low
Soraya Permatasari, Bloomberg/Jakarta
Indonesia's key stock index fell to a four-week low, paced by
lenders such as Bank Danamon and Bank Rakyat Indonesia, on
concern the weakening rupiah will force the central bank to
further boost interest rates.
"Banks' profitability will be hurt this year" as higher rates
will increase costs for lenders, said Darmawan Halim, a Jakarta-
based analyst at Mandiri Securities, who rates the sector as
"underweight."
The Jakarta Composite Index fell 27.29, or 2.6 percent, to
close at 1,016.75, bringing its decline to 4.7 percent in the
past three days.
The benchmark is at its lowest since Aug. 29 when a 5.2
percent slide sent the market to an eight-month low. The rupiah
on that day had its biggest drop in four years.
A measure tracking financial stocks accounted for 29 percent
of the decline, the second-biggest drag on the index. Danamon,
the nation's fifth largest lender, lost Rp 200, or 5 percent, to
Rp 3,825. Smaller rival Bank Niaga dropped Rp 15, or 3.9 percent,
to Rp 370.
Bank Mandiri, Indonesia's largest lender by assets, fell Rp
40, or 2.9 percent, to Rp 1,330. Bank Rakyat lost Rp 125, or 4.8
percent, to Rp 2,475.
Bank Indonesia lifted its benchmark rate to 10 percent on
Sept. 6, its third increase in four weeks, to help stop the
currency's slide and rein in inflation.
The yield on one-month central bank bills, a benchmark for
deposit rates in Indonesia, was kept at 10 percent for a third
week at an auction yesterday, the highest since June, 2003.
The currency this year has so far declined 9.5 percent, the
worst performer among the 15 Asia-Pacific currencies tracked by
Bloomberg, as crude prices surged 56 percent and the cost of
subsidizing fuel for the poor rose.
The rupiah declined for a sixth day, losing 0.1 percent to
10,229 per dollar. It is the world's worst performing currency
over the past five working days.
Indonesia, the only member of OPEC that is a net oil importer,
is planning to reduce oil subsidies. That is expected to stop the
drain on government coffers and support the rupiah but result in
higher prices of gasoline and cooking fuel.
"I'm staying clear of Indonesia at the moment because plans to
increase fuel prices will push up inflation," said Kelvin
Miranda, who helps manage $210 million at Asian Asset Management
Sdn. in Kuala Lumpur.
"Such a move may also trigger social unrest." The government
raised its forecast for inflation this year to 8.6 percent from
7.5 percent estimated in June.
PT Astra International, the nation's biggest auto seller, fell
Rp 450, or 4.7 percent, Rp 9,050. PT Gudang Garam, the biggest
cigarette maker, slid Rp 500, or 4.5 percent, to Rp 10,700.
Higher fuel costs may damp consumer spending.
A parliamentary panel Sept. 20 approved a government proposal
to cap subsidies at Rp 89.2 trillion (US$8.7 billion) this year.
The figure is less than the Rp 138.6 trillion President Susilo
Bambang Yudhoyono estimated on Aug. 31.
PT Gajah Tunggal, an Indonesian tiremaker partly owned by
Michelin & Cie, Europe's largest tiremaker, fell Rp 50, or 8.8
percent, to Rp 520, its biggest decline since Aug. 29.
Elsewhere, Bank Central Asia fell after it resumed trading
following the government's sale of its 5.02 percent remaining
stake in the nation's second-biggest lender. Bank Central Asia,
locally known as BCA, declined Rp 50, or 1.4 percent, to Rp
3,425.
The government raised Rp 2.19 trillion from selling the stake
to investors on Wednesday at Rp 3,550 a share, a 2 percent
premium to the Rp 3,475 closing price on Sept. 20.