Fri, 05 Sep 2003

RI stock index hits fresh three-year high

Dadan Wijaksana, The Jakarta Post, Jakarta

The Jakarta Composite Index surged on Thursday to its highest level in more than three years as foreign funds continued flowing into the bourse.

Led by continued heavy buying of blue chips shares, the index closed at 575.19 points, around 3 percent higher than the previous day's closing.

The index also recorded a multi-month high of Rp 1.5 trillion (US$176.78 million) in daily trading value, which dealers attributed the surge in foreign fund inflows.

"Just like on Wednesday, heavy buying by foreigners of blue chips shares was the reason for this," a dealer with a local bank said, adding that JP Morgan Securities and ING Securities were among the busiest traders of the day.

The hectic buying started on Wednesday, when trading value jumped to Rp 1.3 trillion from its normal daily range of Rp 300 to Rp 400 billion.

This means that in the past two days alone, the index has risen by around 7 percent, and since the start of the year by 30 percent.

The dealer said that the capital inflows had to be seen in the light of the country's macroeconomic performance, notably the declining trend in Bank Indonesia's benchmark one-month SBI interest rate.

"The stable macroeconomic picture has helped boost foreign investors' confidence in Indonesia's economy," he said, adding that the falling SBI interest rate had made the stock market more attractive for portfolio investment, especially for those seeking quicker and higher returns.

The central bank slashed its rate to an historic low of 8.83 percent this week, down from 8.91 percent the previous week, on the back of continued easing in inflation. Many have predicted inflation will be only between 5 percent and 6 percent by the end of the year.

The relatively calm political and economic situation following the recent bombing at a Jakarta hotel had also supported foreign investor confidence, he added.

Meanwhile, thanks to the capital inflows, the rupiah remained stable despite dollar demand from importers, which had put the local unit under pressure over the past few days.

The dollar closed on Thursday at Rp 8,480, unchanged from its close the day earlier.

Dollar demand from importers pushed the rupiah down to 8,495 per dollar at midday, but the flow of funds into the stock market helped the local currency regain ground.

Analysts have said that the planned Rp 5 trillion bond issue next week would likely keep the capital inflows going, ensuring an even brighter outlook for the rupiah.