Shares up on hopes of fuel subsidy cut

Shares up on hopes of fuel subsidy cut

Dow Jones, Jakarta

Indonesian shares ended higher on Thursday as foreign bargain- hunters continued to snap up blue chips on expectations that the government will soon announce plans to cut fuel subsidies to support the rupiah, dealers said.

The Jakarta Stock Exchange Composite index advanced 2 percent, or 21.070 points, at 1080.450.

Gainers led decliners 113 to 29, with 47 stocks unchanged.

Volume rose to two billion shares valued at Rp 1.8 trillion (US$173.75 million), compared with 958 million shares valued at Rp 1.2 trillion on Wednesday.

Indonesia is considering cutting fuel subsidies by between 50 percent and 60 percent, Secretary General of the Ministry of Finance JB Kristiadi told Dow Jones Newswires on the sidelines of an Asia-Pacific Economic Cooperation (APEC) meeting in South Korea.

Indonesia sets domestic fuel prices below international levels and makes up the difference from the state budget. Recent spikes in oil prices have weighed heavily on Indonesia's budget and on the local currency.

"The plan to cut oil subsidy by up to 60 percent should help the rupiah, renewing hopes that the economy will expand as targeted," said a trader with a local securities firm. The government expects the economy to expand by 6 percent this year, compared with 5 percent in 2004.

Among active stocks, bellwether PT Telekomunikasi Indonesia (Telkom) jumped 4.8 percent to Rp 5,450 on renewed expectations of solid nine-month earnings due to an increase in revenue from cellular services.

Telkom's rival Indonesian Satellite (Indosat) gained 2.8 percent to Rp 5,450 after its American Depositary Receipts in New York ended 0.8 percent higher overnight.

Automotive company Astra International rose 4 percent to Rp 10,400, on bargain-hunting after falling earlier this week due to a bearish market.

Bucking the trend, Bank Mandiri, the nation's largest lender by assets, lost 0.7 percent to Rp 1,350 on expectations of poor 2005 earnings due to high interest costs.

Dealers said they expect shares to continue to trade higher Friday on further foreign program buying in telecommunications blue chips.

Meanwhile, the rupiah ended steady for the second day in a row on Thursday as the market awaited further measures from the government on its fuel subsidy policy, dealers said.

The dollar closed at Rp 10,360, unchanged from its close on Wednesday.

Dealers said Bank Indonesia's policies introduced earlier this week -- such as a 50-basis-point hike in benchmark rate -- managed to calm the market.

But the dollar still looked well-supported at this level, as the market has not yet seen any clear timetable on the government's plan to cut the fuel subsidies in the state budget by raising domestic fuel prices.

"I don't expect to see significant capital inflows until the government discloses a clear timetable on subsidy cuts," a dealer with a foreign bank said. "Easing oil prices currently in the global market helped sentiment on the rupiah for now, but there's no guarantee oil prices won't rise again."

The rupiah's stability was welcomed by stock market investors. The main index rose 2 percent on Thursday as foreign investors bought back local shares.

Dealers expect the dollar to trade between Rp 10,250 and Rp 10,390 on Friday.