Local stocks up 7.5% on bullish regional mart

JAKARTA (JP): Share prices rallied on the Jakarta Stock Exchange (JSX) on Thursday due to bullish regional market sentiment, with the main price index rising 7.5 percent in active trading.

Securities analysts said the local price surge followed an upward trend in regional markets, which mostly showed some strength on news of a possible cut in U.S. interest rates.

The rupiah also closed firmer, slightly rising to 10,975 against the U.S. dollar, compared to Wednesday's close of 11,075.

The analysts said the recent debt accord between the government and Paris Club creditors to reschedule US$4.2 billion in sovereign debts also helped ignite the buying spree.

"The debt accord will, at least, provide more leeway for the Indonesian government to finance its budget," an institutional broker with Trimegah Securindo Lestari said.

Bahana Securities associate director Andre Cita said, however, that the improved buying mood would be shortlived since the country's long-term economic prospects remained bleak.

"Although the debt accord has bought some breathing space for the Indonesian government, investors are not having a big party yet," he said, pointing out that huge corporate debts and persistent political uncertainty at home would pose an obstacle for the government to improve the economy.

Trimegah's broker said several foreign investors had snapped up certain blue chip stocks which had been under strong selling pressure in the previous week to take advantage of improved regional sentiment.

Several foreign brokerage firms operating in the local exchange, including GK GOH Ometraco, Credit Lyonnais Capital Indonesia and Merrill Lynch Indonesia, made bulk buying orders on Thursday for undervalued blue chip stocks.

The JSX Composite Index rose 7.59 percent or 19.91 points to close at 282.16 on Thursday, with a total turnover of 325.52 million shares worth Rp 311.47 billion ($28.31 million).

Gainers outpaced losers by 83 to 9 with 73 stocks remaining unchanged.

Most large-cap stocks ended higher, with state-owned telephone monopoly PT Telkom gaining Rp 200 to close at Rp 1,775 on a total turnover of 22.7 million shares changing hands and satellite operator PT Indosat rising Rp 625 at Rp 6,375 on 496,500 shares.

State-owned general mining firm PT Aneka Tambang was up Rp 125 at Rp 1,275 on 18 million shares traded, while tin mining firm PT Tambang Timah climbed Rp 250 to Rp 3,900 on 1.3 million shares

Cigarette maker PT HM Sampoerna was up Rp 350 at Rp 2,100 on 20.2 million shares traded, while competitor PT Gudang Garam was Rp 250 higher at Rp 4,750 on 5.4 million shares.

The head of research at Mashill Jaya Securities, Edhi Widjojo, said, however, that the rise in stock prices did not reflect a recovery of market confidence since the country was still seen as politically and economically unstable.

"Besides, the market is still fazed by possible student demonstrations in the coming weeks," he said, referring to reports that students planned to hold demonstrations in the run- up of the General Session of the People's Consultative Assembly in November.

Hundreds of farmers and students staged a rally outside the House of Representative (DPR) on Thursday in a series of protests against the government and escalating prices.

Despite Thursday's demonstration, the rupiah managed to close slightly firmer at 10,975 against the U.S. dollar amid persistent dollar-selling by state banks to prop up the currency.

"But the rupiah did not improve much since investors were still cautious to take any new position," Robert L. Toruan, a dealer for Bank Niaga, said.

Market players are still cautious and awaiting the end of political uncertainty at home, along with the results of the investigation into the wealth of former president Soeharto and the fate of banks frozen by the government, Robert said.

"When all these things are put in place, we will see some improvement in the rupiah." (aly)