IPO plan creates active buying in bank shares
Dadan Wijaksana, The Jakarta Post, Jakarta
Heavy buying on banking shares helped the Jakarta Composite Index up on Wednesday, with traders attributing the sentiment to the government's plans to sell a 15 percent stake in Bank Mandiri -- the country's largest bank.
The index ended up 0.4 percent higher, or 2.107 points, at 504.53, compared with the previous day's closing, with the total volume of 1.27 billion shares worth Rp 540 billion.
Over the past several months, the stock market sentiment has been positive with bargain-hunters seeking attractive local shares, still considered undervalued.
"Aside from Gudang Garam and Astra shares, gains in many banks have also helped the movement of today's index," a stock trader at a local securities company said, referring to the largest cigarette maker and auto giant PT Astra International.
"Investors have been eying banking shares since Mandiri's IPO plan became obvious last week," he added, referring to the bank's initial public offering plan, in which around 2 billion shares will be on offer.
Mandiri has total assets of around Rp 250 trillion (around US$30 billion).
"That has further buoyed the market sentiment, already positive due to the strong showing of the rupiah."
The market is betting that there would be a strong demand on the IPO, and investors who fail to buy the shares during the offering period would go to the secondary when the shares are listed next month, a move that would push up the price of the shares and may also raise the prices of shares in other listed banks.
Since early this year, the local unit has appreciated close to 10 percent to the U.S. dollar, taking advantage of the greenback's recent shaky performance and the country's stable macroeconomic condition.
Out of the 23 banks listed on the Jakarta Stock Exchange, eight banks saw the prices of their shares rising, with Bank Negara Indonesia (BNI) enjoying the highest gains of 17 percent.
BNI rose by Rp 25 to close at Rp 170.
Bank Central Asia (BCA), the country's largest private bank, also closed higher at Rp 2,725, 0.9 percent up from Tuesday. So did Bank Danamon and Bank Niaga, ending up higher to close at Rp 1,300 and Rp 45, respectively.
Asked whether the upward trend in the banking shares would continue, another trader said she was not so sure, saying that there would be a point where everything would all come down to the fundamentals.
"Fundamentally speaking, the banking sector in the country is yet to fully recover as credits to private sector, despite rising, haven't reached a level that can drive the economy. I think this trend will be short-lived," she said.
She was quick to add however, that the Mandiri's IPO plan would form a significant part of efforts to instill confidence in the banking sector. Being a publicly listed company would force the management to take prudential and transparent steps in managing the bank.