Jakarta Stocks fall on inflation fears; Mandiri, Telkom drop
Jakarta Stocks fall on inflation fears; Mandiri, Telkom drop
Bloomberg, Jakarta
Jakarta stocks fell, led by Bank Mandiri and PT Astra International, after the nation's central bank raised its inflation forecast for this year, a signal it may boost interest rates further.
"The new forecast shocked everyone," said Mustafa Kamil, an analyst at Phillip Securities Indonesia in Jakarta.
"Faster inflation means higher interest rates, which will hurt banks. The consumer sector will also be hit because people will think twice before making purchases."
The Jakarta Composite Index fell for a second day, losing 10.91, or 1 percent, to close at 1,062.17. Declining stocks led gainers 65 to 26.
Bank Indonesia on Monday raised its inflation forecast for this year to 14 percent from an earlier estimate of 12 percent because of a government decision to increase fuel prices.
The bank said it may boost interest rates.
Bank Mandiri, the country's largest lender by assets, declined Rp 40, or 2.9 percent, to 1,340 on concern higher interest rates will slow demand for loans and boost costs to pay depositors. Bank Permata, the seventh-largest lender, slipped Rp 10, or 1.8 percent, to Rp 560.
Stocks also fell after Coordinating Minister for Economic Affairs Aburizal Bakrie said the economy may grow 5.8 percent this year, lower than the government's previous forecast of 6 percent, as higher fuel prices and increased interest rates may curb consumer spending.
Consumer spending accounts for 65 percent of the country's gross domestic product.
The government more than doubled retail fuel prices on Oct. 1 to cut the cost of energy subsidies.
The move spurred Bank Indonesia to raise its benchmark rate a full point to 11 percent on Oct. 4, the fourth increase in nine weeks.
"We are underweight in the banking sector" because of rising inflation and interest rates, said Budi Budar, who helps manage about US$110 million at PT NISP Sekuritas.
"We are also underweight on the consumer sector."
Astra, Asia's biggest auto retailer by value, fell Rp 100, or 1.1 percent, to 9,100. PT Ramayana Lestari Sentosa, Indonesia's second-largest retailer by sales, dropped Rp 20, or 2.8 percent, to Rp 700.
PT Telekomunikasi Indonesia, or Telkom, Indonesia's biggest phone company, slid Rp 100, or 1.9 percent, to Rp 5,050. The stock also fell on concern a weaker rupiah will hurt earnings.
Telkom, which had US$841 million in dollar-denominated debt at the end of June, faces higher repayments costs as the local currency declines.
"Forex losses are seen hurting Telkom's third-quarter profit," Yuga Wijanarko, an analyst at PT Danareksa Sekuritas, wrote in a note to clients on Tuesday.
The rupiah dropped 5.2 percent in the three months ended Sept. 30 against the dollar, making it the world's second worst- performer in the quarter among 61 currencies tracked by Bloomberg.
PT Energi Mega Persada, Indonesia's second-largest publicly traded oil and gas company, declined Rp 20, or 2.6 percent, to 740. PT Bumi Resources, the biggest exporter of coal, slipped Rp 10, or 1.3 percent, to Rp 780.
PT Bank Central Asia, Indonesia's largest lender by market value, gained Rp 25, or 0.8 percent, to Rp 3,350. Nine-month profit rose 12.4 percent on the year to Rp 2.63 trillion as it increased lending, it said yesterday after the market closed.