Indonesian stocks up as Pertamina puts prices down

Indonesian stocks up as Pertamina puts prices down

Naila Firdausi, Bloomberg/Jakarta

Indonesia's key stock index had its biggest jump in seven weeks
after state oil and gas company PT Pertamina signaled it may cut
fuel prices for industrial users, reducing costs at companies
such as PT International Nickel Indonesia.

"Lower fuel prices at companies will help earnings," said
Fendi Susiyanto, who helps manage the equivalent of US$99 million
at PT Bank Permata. Investors "are now more optimistic about
economic prospects."

The Jakarta Composite Index jumped 21.70, or 2.1 percent, to
1054.99 at the 4 p.m. local time close, the biggest advance since
a 3 percent surge on Sept. 30. The measure rose 2.5 percent this
week. The benchmark on Friday had the biggest fluctuation among
equity markets included in global benchmarks.

Pertamina may cut fuel prices for industrial users next month
because oil prices have declined, Achmad Faisal, the company's
head of marketing, said on Friday. Oil slid 2.7 percent to $56.34
a barrel in New York on Thursday, the lowest close since June 15.
Futures were recently at $56.35 in after-hours trading.

International Nickel, a unit of Canada's Inco Ltd., surged Rp
550, or 4.6 percent, to Rp 12,400, its biggest gain since Aug.
30, on optimism the cost of extracting the metal will fall. PT
Semen Gresik, Indonesia's biggest cement maker, rose Rp 500, or
2.6 percent, to Rp 19,650. Energy accounts for about a third of
Indonesian cement makers' production costs.

PT Astra International, Indonesia's biggest auto distributor,
climbed Rp 350, or 4 percent, to Rp 9,050.

"Lower global oil prices also mean it's unlikely the
government will raise fuel prices again next year and that's good
for auto retailers," said Permata's Susiyanto.

The government on Oct. 1 more than doubled, on average, fuel
prices sold to retail users to prevent oil subsidies draining the
nation's coffers. The Jakarta Composite Index dropped 4.3 percent
since then to Thursday on concern fuel costs would damp consumer
spending. Consumption accounts for about two-thirds of the
country's economy.

Pertamina on Nov. 1 raised the price of kerosene, automotive
diesel, marine diesel and fuel oil sold to miners, exporters and
oil companies for the sixth time in nine months.

PT Telekomunikasi Indonesia (Telkom), Indonesia's biggest
telephone company, added Rp 100, or 2 percent, to Rp 5,150. PT
Gudang Garam, the biggest cigarette maker, gained Rp 350, or 3.4
percent, to Rp 10,700.

Elsewhere, PT Bank Rakyat Indonesia (BRI) led lenders higher
on expectations inflation will slow, boosting optimism of lower
interest rates next year. BRI, Indonesia's fourth-largest lender,
added Rp 100, or 3.8 percent, to Rp 2,725, the highest close
since Sept. 13. PT Bank Mandiri, the largest, gained Rp 40, or
3.5 percent, to Rp 1,180.

BRI slid 9.3 percent last month while Mandiri dropped 9
percent on concern higher interest rates would damp loan demand.
The Jakarta Composite declined 1.2 percent in that time. The
central bank on Nov. 1 raised its benchmark interest rate for a
fifth time in nine weeks to rein in inflation.

"Indonesian banks shares have declined too much and selective
stocks are cheap," said Alvin Pattisahusiwa, who helps manage the
equivalent of $199 million at Fortis Investments in Jakarta.
"With the central bank expecting inflation to slow at the end of
next year, interest rates will decline and that will help banks."

Bank Indonesia's Governor Burhanuddin Abdullah said on Nov. 16
that inflation may "gradually" slow to between 7 percent and 8
percent at the end of next year. Inflation, which reached 17.9
percent in October following the government's Oct. 1 fuel price
increases, may stay above 10 percent until the end of the third
quarter of 2006, he said.