Jakarta stock index hits another all-time high

Jakarta stock index hits another all-time high

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta stock index skyrocketed on Wednesday to another
record level in the nation's history, as foreign investors
reentered the market again to capitalize on rising optimism after
profit-taking over the last couple of days.

The Jakarta Composite Index ended up by 13.420 points, or 1.8
percent, at 756.563.

Shares of cigarette companies led the Index higher on optimism
of surging sales this year on higher demand over the seven-month
general election period, and on the government's decision not to
raise cigarette excise duties this year and next year.

Cigarette producer PT HM Sampoerna, the sixth largest counter
on the Jakarta Stock Exchange, surged by Rp 250 to Rp 5,450.

Its rival, PT Gudang Garam, the second largest counter, also
rose by Rp 250 to Rp 15,300.

Other bluechips such as automotive assembler and distributor
PT Astra International, telecommunications company PT Indosat,
and Bank Rakyat Indonesia (BRI) also ended higher, contributing
to the surge in the Index.

Astra ended up by Rp 100 at Rp 5,600, Indosat by Rp 250 at Rp
16,750 and BRI by Rp 75 at Rp 1,550.

A stock analyst with a state-owned brokerage house said that
the surge was mainly fueled by an inflow of capital from
investors in the United States and Europe, taking advantage of
the growing market capitalization.

He explained that for the last two days the Index had gone
through some consolidation after foreign investors took gains
from the recent surge in the Index.

"New investors from Europe and the United States are now
interested in investing in our stock market because of a growing
market capitalization. But their investments are short term," he
said.

Around 80 percent of the money that has entered the stock
market lately has been from foreign investors, making the bourse
overly sensitive to negative news, locally or globally.

The analyst also said that the decline in Bank Indonesia's
benchmark interest rate to an all-time low of 8.06 percent on
Wednesday from 8.24 percent previously, had also helped drive the
Index up.

The Index surged by 63 percent last year, making it the third
best performer in Asia after Thailand and India. On Jan. 9, the
Index stood at 753.692.

A number of analysts have forecast that the Index may climb
higher toward 800 this year despite security concerns during the
general election.

Stable macro-economic indicators and relatively higher
consumer purchasing power this year are seen as being the main
impetus for the Index to go higher.

Despite its limited direct impact on the country's overall
economy, the rally in the stock market serves as a measure to
gauge investor confidence in the country's economy.

As for companies, the stable and high index figure can be an
effective alternative for raising funds because with the current
surge in the Index, companies planning to sell their shares on
the stock market will obtain higher proceeds.

Elsewhere, the Indonesian rupiah failed to tail the surge in
the Index, as it ended the day down against the U.S. dollar at Rp
8,340 from Rp 8.330 on Tuesday due to profit taking and rising
dollar demand from importers.