Stock drops; banks off on slowing loan demand

Stock drops; banks off on slowing loan demand

Soraya Permatasari, Bloomberg/Jakarta

Key stock index fell on Monday to a two-week low. Bank Central Asia (BCA) paced lenders lower after a central bank survey indicated that growth in loan demand may slow in the third and fourth quarters.

The Jakarta Composite Index fell 6.613, or 0.6 percent, to close at 1,090.09, reversing an earlier gain of as much as 0.4 percent.

The benchmark dropped to its lowest since Oct. 3. About two shares fell for each one that rose.

Loan demand probably rose at a slower pace in the third quarter and may slow further in the final three months of the year as interest rates continue to increase, the central bank said today, citing a survey of 50 banks in Jakarta.

Bank Central Asia, the nation's second-largest lender, dropped Rp 25, or 0.7 percent, to Rp 3,350. PT Bank Mandiri, the largest bank, lost Rp 30, or 2.1 percent, to Rp 1,380.

PT Bank Niaga, a smaller rival, slid Rp 5, or 1.3 percent, to Rp 380. PT Bank Danamon fell Rp 75, or 1.9 percent, to Rp 3,925. A measure of financial stocks on the exchange accounted for 62 percent of the broader index's decline today.

The central bank has increased its benchmark rate by 2.5 percentage points since July 5 to curb inflation that it forecasts will accelerate to 12 percent by the end of 2005 after the government raised fuel prices to cap subsidies.

Consumer prices rose 9.1 percent to a 33-month high in September.

"The banking sector has been hard hit and is less favored by investors this year," said Irvin Patmadiwiria, who has sold most of the banking stocks in the equivalent of US$157 million of assets he helps manage at PT Batavia Prosperindo Aset Manajemen in Jakarta.

The government more than doubled fuel prices on Oct. 1 to kept its budget deficit at 0.9 percent of gross domestic product.

"Indonesia's macro adjustment has come sooner than expected," Joshua Tanja, an analyst at UBS AG in Jakarta, said in a report published on Oct. 14. Third quarter and fourth quarter results at banks "could show rising costs of funds, falling margins, bond losses and rising non-performing loans."

The rates for rupiah deposited in banks will probably continue to increase to an average 7.76 percent in the fourth quarter from 6.96 percent in the third quarter, the central bank said in the statement.

Elsewhere, PT Indocement Tunggal Prakarsa, the nation's biggest cement maker by market value, gained Rp 75, or 2.5 percent, to Rp 3,050. Smaller rival PT Semen Cibinong added Rp 5, or 1.1 percent, to Rp 460.

Sales by all Indonesian cement makers increased 1.5 percent to 3.62 million tons last month from a year earlier. Exports fell 10.9 percent to 580,129 tons, while domestic sales rose 4.2 percent to 3.04 million tons.

In the nine months ended Sept. 30, total cement sales in rose 7.8 percent to 24 million tons, while exports fell 15.8 percent to 4.92 million tons.