Jakarta Stock Index rises to 11-month high, Telkom gains

Jakarta Stock Index rises to 11-month high, Telkom gains

Bloomberg, Jakarta

Indonesian stocks rose, lifting the benchmark index to its
highest in almost a year, after inflation in May eased to the
lowest in 32 months, raising optimism the central bank will cut
interest rates. PT Telekomunikasi Indonesia paced gains.

The Jakarta Composite Index climbed 10.948, or 2.2 percent,
to 505.724, the highest since June 27, at the 4 p.m. market close
in Jakarta. Two shares rose for every one that fell. The benchmark
has gained 28.8 percent in dollar terms this year.

Lower rates would lower the discount rate factor, a tool
used to value companies, raising their valuations, some analysts
said. Companies are valued by calculating the present value of
their future cash flow.

The low inflation would "give room to the central bank to
further cut interest rates," said Erwan Teguh, an analyst at
PT Danareksa Sekuritas. "Lower interest rates mean lower discount
rates, thus the value of companies must rise".

Telkom rose Rp 275, or 5.9 percent, to Rp 4,950. Investors
expect Telkom to post a higher profit this year, helped by a gain
in the rupiah. Telkom pays for its equipment from overseas with
U.S. dollars and receives its revenue from telephone services it
provides in rupiah. Telkom also has dollar debts.

"The stronger rupiah will boost Telkom's performance," said M.
Setyo Adhi, an analyst with PT Samuel Sekuritas, who raised
Telkom's 2003 profit forecast to above Rp 6 trillion (US$720
million) from Rp 5.8 trillion, citing benefits from the
strengthening rupiah.

The rupiah gained 0.5 percent, to Rp 8270 to the dollar at
4:10 p.m. It gained 2.6 percent to the dollar in April.

PT Unilever Indonesia, the Indonesian unit of the world's
biggest food and soap maker, rose Rp 600 rupiah, or 2.5 percent, to
Rp 25,100 as the stronger local currency is expected to help
boost consumer spending.

PT Gudang Garam, Indonesia's largest cigarette maker, rose
Rp 250 rupiah, or 2.5 percent, to Rp 10,250.

PT Indomobil Sukses Internasional, Indonesia's second-largest
automaker, rose Rp 225, or 28 percent, to Rp 1,025 after the
company reported that 2002 sales rose 22.4 percent to Rp 11.74
trillion. It booked a profit of Rp 971 billion from a loss of Rp
51 billion because of foreign exchange and asset sale gains.