Jakarta financial market extends gains on U.S. rate cut hopes

JAKARTA (JP): The rupiah gained ground on Tuesday, closing slightly firmer at 10,725 against the U.S. dollar, thanks to market expectations of a U.S. interest-rate cut.

Stock prices on the Jakarta Stock Exchange (JSX) followed suit, closing one point stronger at 276.00 after investors started to pick up undervalued stocks, stock analysts said.

The rupiah opened at 10,900 and continued to strengthen in moderate dealing while some market participants waited for the outcome of the U.S. Federal Open Market Committee (FOMC) meeting on interest rate policy,

"The market has expected a reduction in U.S. interest rates. This boosts both regional currencies and global stock markets," a chief dealer with a local private bank said.

The rupiah's close at 10,725 against the American dollar on Tuesday compared to Wednesday's close at 10,875.

But market participants said political jitters might continue to cap rupiah gains in the coming days.

The military beefed up its presence in the capital and other major cities on Tuesday following speculation that there would be a big demonstration to mark the anniversary of the country's failed bloody communist coup on Sept. 30.

"The market has so far not yet been influenced significantly by these talks of possible massive demonstrations," the chief dealer said.

Trading turnover on the JSX totaled 295.66 million shares changing hands valued at Rp 173.38 billion (US$16 million).

Gainers slightly outnumbered losers, 50 to 42, with 76 stocks unchanged.

The head of research at Panin Securities, Anton Karlam, attributed the slight increase in stock prices to market expectations of a U.S. rate cut.

"I think this is the main reason for the increase," he said.

However, he noted that the country's economic and political uncertainty would cause local trading to remain volatile.

"Investors are still scared to make any massive buying orders as the country's long-term economic outlook remains bleak," he said.

A stock broker with Trimegah Securindolestari said that most buying orders came from domestic investors as foreign investors stayed on the sidelines due to market talk of possible demonstrations or riots.

Certain big cap stocks, which had been under persistent selling pressure over the past few days, increased on Tuesday.

Cigarette giant PT Gudang Garam's stock price rose Rp 375 to Rp 5,200 on 1,95 million shares traded and its competitor PT HM Sampoerna up Rp 50 to Rp 2,225 on 2.23 million shares.

State-owned tin mining firm PT Tambang Timah gained Rp 175 to Rp 4,475 on 859,500 shares changing hands.

However, market leader state-owned telecommunications firm PT Telkom, which accounts for some 17 percent of market capitalization, slid Rp 75 to Rp 1,625 on 4.56 million shares. State-owned international call operator PT Indosat also dropped, Rp 75 to Rp 5,600 on 710,500 shares.

And state-owned cementmaker PT Semen Gresik dropped Rp 1,075 to Rp 6,075 on 3.3 million shares on news that Cemex SA of Mexico won the last round of bidding for a 14 percent government stake in the company. (aly)