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.