Jakarta stocks hit all-time high

Rendi A. Witular, The Jakarta Post, Jakarta

The Jakarta Composite Index skyrocketed on Monday to the highest level in the nation's history, as new investors from the United States and Europe entered the market seeking to capitalize on the rising optimism.

The Index moved full-throttle ahead and ended up by 22.877 points, or 3.1 percent, at 753.692, the highest since the benchmark index began in 1982. It also recorded an all-time high in volume of Rp 1.99 trillion (US$227 million).

Previously, the highest level ever recorded by the bourse was 742.983 on July 9, 1997, one month before the financial crisis hit the region.

As always, shares in state-owned telecommunications company PT Telekomunikasi Indonesia (Telkom) led the Index higher after its American Depository Receipts in the New York Stock Exchange surged by 4.7 percent to $18.45.

Telkom shares, the largest counter on the Jakarta Stock Exchange, ended up by Rp 200 to Rp 7,700.

Cigarette producer Gudang Garam, the second largest counter, also rose by Rp 500 to Rp 14,700 after the government told cigarette producers to increase their output amid an absence in the increase of excise rates this year.

Ferry Yosia Hartoyo, the head of research for PT DBS Vickers Securities Indonesia, said that the surge was mainly fueled by an inflow of capital from new investors in the United States and Europe, taking advantage of the growing market capitalization.

He said that usually only Asian investors were interested in the country's stock market.

"The U.S. and European investors entered Indonesia because they see that now the stock market capitalization is growing to a figure that meets their requirement. Large market capitalization will enable them to rake in higher profits," said Ferry.

However, he said that the investors were still limiting their investment as they were waiting for the development in the country's general election and in the government's efforts to finance the state budget deficit, which is estimated to reach Rp 24.4 trillion this year.

If the country could pass all of the obstacles, the Index was estimated to climb higher to even 800, he said.

Elsewhere, Mirza Adityaswara, a stock analyst with PT Bahana Securities, said that 80 percent of the money which entered the stock market on Friday was from foreign investors, making the bourse overly sensitive to negative news, locally or globally.

"With such a huge amount from foreign investors, our stock market remains sensitive to foreign investor sentiment, unlike Thailand which only has 30 percent of foreign funds in its stock market," said Mirza.

Aside from the influx of foreign funds, the surge in the Index was also caused by the optimism that pervaded stock markets worldwide, Mirza said.

Japan's Nikkei Index ended up 1.2 percent to 10,965, while the U.S. Dow Jones industrial average rose by 63.41 points on Thursday, or 0.60 percent, to 10,592.44, its highest finish since March 2002.

Mirza was optimistic that despite a possible correction during the general election, the index would remain firm throughout the year because the country's macroeconomic situation was now relatively "controllable".

Despite its limited direct impact on the country's overall economy, the rally of the index should be a measure to gauge investor confidence in the country's economy.

As for companies, the stable and high index figure can be an effective source of funding and working capital, because the stock market increase the value if companies.

Elsewhere, thanks to capital inflows from foreign investors into the stock market, the Indonesian rupiah ended the day higher at Rp 8,340 against the U.S. dollar. The rupiah ended at Rp 8,345 on Thursday.

10 largest brokers on Friday (in terms of net value)

Broker Value

1. CLSA Indonesia Rp 197.6 billion 2. ING Securities Indonesia Rp 77.8 billion 3. ABN Amro Asia Securities Rp 76.8 billion 4. BNP Paribas Peregrine Rp 73.4 billion 5. DBS Vickers Securities Rp 61.9 billion 6. Bhakti Capital Indonesia Rp 50.8 billion 7. JP Morgan Securities Rp 36.9 billion 8. Semesta Indovest Rp 14.3 billion 9. Makindo Securities Rp 12.2 billion 10. GK Goh Indonesia Rp 12.2 billion

Source: Bloomberg